Apple takes a big leap into the world of banking

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For a long time now, Apple has been dipping its toes into the world of financial services. From digital wallet to Apple payment cards, the tech giant has been gradually building its portfolio of financial products over the years. However, the firm first caught the attention of the market when it announced the plans to launch buy now pay later (BNPL) in June 2022. The foray into the credit market indicated another step by the tech giant into the financial services space, which further reiterated that Apple is gradually turning into a bank. Notably, to further make its push into the world of banking, Apple introduced high-yield savings accounts for Apple cardholders.

• In October 2022, Apple further expanded the scope of its partnership with Goldman Sachs to soon launch a savings account feature for its Apple cardholders. The savings account feature will allow cardholders to save and grow their Daily Cash, the rewards that consumers receive when making purchases using the Apple credit card. Notably, the partnership with Goldman Sachs means that Apple cardholders will be able to access their savings accounts through Apple wallet. Furthermore, cardholders will be able to transfer their money into savings accounts as well.
• To make their savings accounts feature more competitive with the existing neo-banking platforms, Apple announced that the savings accounts will have no fees. Furthermore, there is no requirement to have minimum deposits and minimum balances. The tech giant did not reveal how much interest the savings account owner will earn; however, its competitors are currently offering an interest rate ranging from 2.20% to 3.05%.

To fund their savings account, Apple is offering several different ways to its cardholders. For once, they can fund the account using the linked bank account. Furthermore, they can also use their Apple Cash balance. Notably, the funds can be removed or withdrawn anytime by transferring the amount back to the linked account or their Apple Cash card. This involves zero fees as well.

By default, all the Daily Cash earned by Apple cardholders when making purchases will be deposited to the savings accounts, unless cardholders change it. As of now, Apple is offering 3% cashback when making purchases at select merchants such as Uber, Apple, Nike, Walgreens, T-Mobile, and Panera Bread, among others. On the other hand, Apple card purchases will attract 2% cashback when consumers make use of Apple Pay and 1% cashback when the virtual card number or Titanium card is used for online shopping.

In a significant shift for the tech giant which initially started its business selling personal computers, the move into the financial services space can result in tough competition for traditional banking players. With its superior tech and customer acquisition capabilities, Apple can take the competition to traditional banking institutions without being a bank.

Currently, Apple has a strong position in the digital wallet space. According to PayNXT360 estimates, the tech giant controls over 64% of all the transactions. This is much higher compared to Google Pay, which has a market share of around 20%. Samsung, PayPal, and Walmart are all competitors but with relatively less market share as compared to Apple. Ultimately, Apple is seeking to replace the physical wallets of consumers with digital one. The announcement of launching savings accounts feature further expands the ambitions of the tech giant.

While Apple continues to gradually move into the world of banking with the launch of different financial services, Goldman Sachs is also making inroads into the banking space. Notably, Marcus by Goldman Sachs is part of the firm’s strategy to become a conventional bank. In 2021, Goldman Sachs also announced that the firm had achieved a milestone of US$100 million in customer deposits through Marcus. The strategic collaboration with Apple will help Goldman Sachs to make further inroads into the consumer deposit segment.

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