The Apple Card is finally here, offering a flashy titanium card engraved with your name next to Apple’s logo. Is it the best credit card in the market? And if it isn’t, why is there so much hype around it?
First, let’s chat for a brief moment about what it offers. In a nutshell: the card is secure, since it’s supposed to be used mainly through Apple Pay on an iPhone, and if you ever got your card number stolen, you can get a new one without replacing the rectangle that lives in your wallet. The card is smart, because it shows transactions in real time alongside the full names and locations of the places where you use it; it also offers visual representations of your expenses so that you are aware of the categories you spend the most on. The card promotes financial responsibility, because it encourages users to avoid paying any interest, and it has no fees at all. It’s respectful with your privacy since Apple doesn’t know what, where or how much you spent (Goldman Sachs knows, but according to their contract with Apple, they will never share or sell your data to third parties for marketing or advertising). Finally, the card offers a tiered rewards system that gives you money back on a daily basis.
So let’s get it out of the way: the Apple Card is not the best card in the market, but it isn’t a bad card either, especially for people who need a bit of help being responsible with their finances. However, this new Apple product is a wolf in sheep’s titanium clothing: it’s a card engineered to push users deeper into the Apple ecosystem. It’s basically a jail card, let’s explore why.
Friction to change
Some countries have a credit score system, like the U.S., where a person’s score is used for important things like getting a loan or a mortgage. Customers are discouraged to switch and close credit cards constantly, since that can lower their credit score. For this reason, once a customer gets the Apple Card, they will likely keep it for a long while, getting automatically tied to an iPhone during all that time; the Apple Card cannot be used with any other phone, since it needs to be activated before each payment through Touch ID or Face ID.
If switching phone ecosystems is already painful (migrating contacts, pictures, messages, etc.), imagine having to factor in switching credit cards at the same time. The Apple Card creates tremendous friction when considering switching from iOS to Android; this is exactly what Apple needs in order to keep you as a potential customer of monetized services like Apple Music.
To do this effectively, Apple just had to offer relatively good rewards in order to elevate the impact of switching phones to the same level as switching credit cards. 2% cash back every time you use Apple Pay (on any purchase category) is a good way of checking that box.
The friction doesn’t stop there though. Closing the credit card might be a challenge in itself, because to do so, customers need to contact Goldman Sachs directly. Apple said that Goldman Sachs employees are being trained using Apple tools and technologies, but it’s still unclear how well will they handle that type of situation.
Privacy and customer service as a product
It’s not a secret that Apple has been using the recent privacy scandals in the tech industry to sell the idea that they are different. To a certain extent, it’s actually true: Apple doesn’t have any advertising business where they need to target users based on their interests or their habits. Because of that, their products can store critical data without the temptation of exploiting it.
Location, contacts, messages, emails, calls, and now purchases. All of this valuable data is gold for companies like Google or Facebook, but not so much for Apple. That’s one of the refreshing benefits of the Apple Card, protected by a contract with Goldman Sachs that prevents them from selling your private data to third parties. Apple can attract a big portion of privacy-aware users who are tired of being the product. This is all about selling privacy as a product.
What happens when a customer gets a payment denied in the middle of a trip? What if a customer wants to update their card information? How easy is to exercise the terms of service and opt out of an arbitration clause? Apple mitigated these concerns by wrapping Goldman Sachs with their own customer service high standards. I can even imagine Apple forcing the bank to provide 24h customer service over text as part of their multi-year partnership. The promise is that dealing with the bank behind the Apple Card should be as easy as chatting over text with a friend, no waiting music, no frustrating calls. Customer service, Apple style.
Rewards and benefits
To tie it all together, Apple made a master move: offer 3% cash back on any purchase made on Apple Stores (including iTunes or the App Store). This is basically like telling customers: buy an Apple product with the Apple Card and you get a 3% discount for free.
For every Apple product a customer buys, the bond with the ecosystem becomes stronger; both the economic and emotional investment for the user gets bigger. As a result, it becomes less likely that an invested customer will abandon the Apple ecosystem.
Apple is planning to extend this premium rewards tier to more merchants that accept Apple Pay. For example, on its launch day, it was announced that any payments done through the Uber and Uber Eats apps will qualify for the 3% cash back rate.
But Apple doesn’t just lure customers with the cash back rates explained above, they also do it through the financial well-being features that come with the card. For example, not many banks offer easy-to-follow visual reports of how customers use their credit cards; Apple Card shows expenses per category using colors, and uses a slider wheel to represent the different payment options and the interest to be paid on each of them. Here is a demo of how that works:
Even though the only way to monetize the Apple Card itself is through interest payments, it’s great to see Apple prioritizing customers’ financial health. This is one more proof of how valuable the jail effect of the Card is, and how Apple is playing a long-term game with customers: retaining them and selling them services tomorrow is more desirable than getting their money today.
If you are a rewards hoarder or a financial power user, the Apple Card might be too basic for you or plainly unnecessary. But if you live in a big city where Apple Pay is widely available, and are looking for a simple credit card with good rewards, the Apple Card might just be it. At the end of the day, don’t forget that it’s just a credit card from Goldman Sachs, wrapped by Apple’s standards, design and software. You just need to consider how deep into the Cave of Wonders are you willing to go. Getting out might not be that easy.
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Images via Apple