Citigroup pulled out of the Apple Card deal over profitability fears

Apple's physical laser-etched titanium Apple Card
Apple’s physical laser-etched titanium Apple Card coming summer 2019


“The sniping began shortly after Apple unveiled its new credit card with Goldman Sachs,” Hugh Son reports for CNBC.

“Within the industry, the deal is widely perceived as one that’s risky for a bank to take on,” Son reports. “Citigroup was in advanced negotiations with Apple for the card but pulled out amid doubts that it could earn an acceptable profit on the partnership, according to people with knowledge of the talks. Other banks, including J.P. Morgan Chase, Barclays and Synchrony, also bid on the business.”

“It turns out that the Apple Card’s consumer-friendly features — no fees of any kind, software that actively encourages users to avoid debt or pay it down quickly, and potentially lower interest rates — make it harder for banks to make money on the product,” Son reports. “Big card issuers profit when customers fall into debt and stay there. Americans paid $113 billion in credit card interest to banks last year, nearly 50% more than five years ago. So adopting the new fintech ethos of zero fees and transparent pricing makes for thinner profit margins.”

Read more in the full article here.

MacDailyNews Take: Sour grapes. Citigroup blew it. Apple and Goldman Sachs have a hit on their hands. The results of our poll taken last month speak volumes:

Will you apply for Apple Card poll results

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Analyst: Apple Card to be a ‘significant player in the U.S. card market’ – April 4, 2019
Apple Card will be the most secure credit card ever made – April 3, 2019
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Apple Card: More than just a mere credit card – March 28, 2019
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Introducing Apple Card, a new kind of credit card created by Apple – March 25, 2019

15 Comments

  1. It seems whatever Apple does, Wall Street is going to balk and say it’s no good. What is it with Apple, anyway? The company doesn’t instill confidence to analysts or investors. If it were Amazon with a new card, they would be praising it to high heaven and saying it will be the most profitable card on the planet. I would think that the Apple Card would need to take some time to catch hold and then a full assessment could be made, say in about a year.

    Maybe I’m just stupid but I can’t make a snap judgment on whether something will be successful or not based on some short-term use. Anyway, it’s a shame to hear how banks want people to stay in debt to make profits for themselves. That just can’t be a good thing.

    1. Indeed, Apple is rarely looked at favorably on Wall Street. It stems from a legacy where a lot of these old coots still running the shows at these big investment houses were burned by Apple long ago. And they now distain the brand, no matter what it does.

      But in 12-18 months, the hot money is going to be in AAPL. It’s around $178 now, and may go lower if Apple misses due to China government/media (same difference) encouraging the anti-American mood to NOT buy our products – especially Apple anything… If that happens and Apple needs to issue another warning, well then we could be looking at $150 or less…

      How HUGE a buying opportunity will that be? China’s slow sales will then be baked in, and the CC will be a huge hit, as will new Apple Watch, new AirPods and Apple TV+ will be another silent sleeper (along with any bundling that could shock to pickup more service money vs what people had been thinking possible).

      Analysts bricked with Apple Music “Can’t get more than 10m subscribers. Now reaching towards 60m. Ha! iPhone being balanced by some many other things it is going to be a stabilizing gold mine to the wise investor. But old Wall St. bigs, until they go away, will keep ignoring AAPL, because of simple bias.

    2. Amazon already has 3 cards out for a while. One a card solely for use on Amazon backed by Synchrony Bank, the 2nd a Visa card issued by Chase, and the 3rd a Business Amazon card issued by American Express. No real fanfare on the level of what Apple Card has generated.

  2. Has anybody seen the deal on late payment? The claim I believe is “no late payment fees” — so…. what happens when I don’t pay? Just interest on the interest?

    At what point do they come for my house?

    1. As I understand it, if you don’t settle in full at the end of the month, you are charged interest at a lower rate than many credit cards and if you fail to make a payment altogether, you get charged interest but do not get penalised with additional late payment fees.

    2. I’m going to guess that they’ll do something when your balance plus added interest exceeds the credit limit on your account for more than a month.

  3. It’s going to take some time before we know how strong Apple will be in the market. I believe that people who don’t ned the FF Miles as much as they do the cash back will love the Apple card.

    In my situation travel is pretty important. I have a British Airways card that gives me miles plus a companion certificate after spending $30K in a year. Basically that allows flights for half the miles. That’s not an ad for BA, it just shows the need to do comparison of benefit between cards.

  4. Finance should not be the center/linchpin of our economy (especially since finance seems to have veered from its overall purpose to support society to an often fixed game for the super-wealthy, who seem to be able to roll any damages for failed high-risk investments onto society). It has become the economy’s center over the last 35 years. It was not so before that. Production of IP, goods, and services should be the undergirding focus, not making money via algorithms and having the fastest upstream taps into the internet backbone. You can’t build an economy and a society on fluff.

    1. The fact that major banks can’t stomach Apple’s refreshing take on personal credit – moving away from predation – says much about the sickness in our financial system. It is supposed to be a servant of society not the vulture picking the flesh off of society.

      1. Unbridled greed is not sustainable. It will eventually cause any society and economic system (no matter which -ism) to crumble from within.

        Ok. I’m done ranting….

  5. I’m not holding my breath with my Australian bank (St George) backing the card any time soon as there’s still no support for Apple Pay. Bastards!

  6. Based on comments on past MDN articles regarding Apple Card, perhaps a follow up poll should be conducted asking how many of those showing any interest in applying for the Apple Card actually intend to use it and not just apply to receive the physical card.

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