Everyone is buzzing over the next big contender for traditional banking: The Apple Card. Apple has developed a reputation for taking things (such as the humble mobile phone) and making them much better. Indeed, they’ve launched some interesting features alongside their new card - ones that are challenging the status-quo in banking. So, what does it mean to have a big company like Apple enter the fintech market and what can competitors take from this?
What is Apple offering?
First, there’s the lack of annual, late, international and over-the-limit fees. The new Apple Card has no pin numbers. Plus, customers can earn cashback when using the card to buy Apple products.
The card will sync with Apple’s Wallet app, giving customers an up-to-date oversight of their spending habits. For better or worse, it will even pinpoint where your last spending spree occurred through Apple Maps. They’ve even taken a leaf out of Revolut Metal’s book, offering a physical titanium card with minimalist features that will leave Silicon Valley-ers drooling.
Why a credit card?
In many ways, the Apple Card is a natural step for the company. Customers are already used to interacting with Apple financially. There’s Apple Pay, of course, but long before this, customers were paying for items in the iStore or applying for finance for the latest iPhone.
It also signals Apple’s move towards more service-based revenue. With iPhone sales plateauing, Tim Cook has stated that the company wants to double its service revenue by 2020. The Apple Card is a key contributor to this.
A perfect complement
The Apple Card also complements Apple’s existing tech stack. It’s an extension of Apple Pay, with a physical card back-up in case a retailer doesn’t support mobile or Apple Watch payments. Around half of iPhone users have activated Apple Pay, therefore, the company already has an engaged customer base to roll its credit card out to. Plus, the desirability of the Apple Card is likely to boost the number of Apple Pay users too.
Additionally, it encourages customers to remain within Apple’s ecosystem. If someone has an Apple Card, they will be less likely to switch to Android (which, obviously, isn’t compatible with the credit card) and pay off the entirety of their card balance.
New… but old
Many of the Apple Card’s features are relatively new to the finance industry. However, that’s not to say that it hasn’t been seen before. The lack of fees, for example, is seen in various forms with challenger banks Revolut, Monzo and N26. The same applies to Apple Card’s freeze card feature - it’s something that started with digital challenger banks and, subsequently, has been adopted by the likes of Barclays. Even its cashback system has been around for a while, in the form of Santander’s 123 account, for instance.
However, what does set Apple Card apart is its seamless integration with the wider Apple ecosystem and the security that this offers. Cardholders can confirm their identity through Face ID and Touch ID. Transactions are encrypted and hidden from both merchants and Apple. If connected to an Apple Watch, there’s wrist detection that tells if the device if the watch has been taken off and prompts the wearer to enter their passcode. All of this boosts customer trust in Apple Card, giving it the edge over banks such as HSBC and TSB who have previously suffered huge data breaches.
Apple Card also has no card number. In a transaction, a one-time token is passed to the vendor instead of a long card number. This further increases security. If a card number is required, a customer can simply generate one digitally. This number will continue to work until a customer decides to stop it. If someone feels suspicious about a vendor, for example, they can simply re-generate the card number.
A lesson for fintech
It’s this focus on security that offers a valuable lesson for the fintech industry. Apple has recognised that if consumers don’t trust its credit card, then they won’t use it. With data breaches being reported almost weekly, consumer trust is on shaky ground. Without it, mainstream adoption is impossible. That’s why the most critical feature of the Apple Card isn’t its cashback or fancy physical card. It’s the protection that Apple has placed around it.
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