A few weeks ago, Apple quietly entered a new era. Unveiled in the UFO-esque Steve Jobs Theatre, this was an Apple event that bucked the trend of previously held, far more publicised product unveils .
Contrary to traditional Apple events, their latest announcements didn’t see the immediate release of any new products or devices. Rather, they centred around Apple’s shift in direction to offer services - now that there are over 1.4 billion actively installed Apple devices (of which over 900 million are iPhones).
In many ways this makes sense. Services allow scale and margins that significantly outperform that of physical products (lower production costs, ability to provide digital content almost anywhere, instantly). With the recent success of Apple Music and paid subscriptions through their app store, Apple saw a 19% increase in services revenue last year.
This increase in revenue hasn’t come without its controversy. In recent weeks, Spotify targeted Apple for taking a 30% cut of all subscriptions through the Apple App Store, and Netflix stopped any new subscribers from signing up to its service through Apple at the end of 2018 for the same reason. Apple has historically had, and continues to hold the upper hand when it comes to selling a subscription or app through its stores, due to the sheer amount of customers accessing these platforms every day.
Amongst the announcements of new Apple TV updates, premium news service and a gaming subscription service, there was an announcement that was as polarising as it was exciting.
One of the more interesting offerings Apple has had to date is the new “Apple Card”.
So what is the Apple Credit Card?
In true Apple fashion, the card itself is both beautiful and strikingly simple. Cut from a single piece of titanium, customers will have their name laser-etched into the surface along with an Apple logo.
This will be perfect for early adopters looking to make big power moves when it comes time to pay the bill at the end of dinner or shouting a round of drinks.
Offering this service is part of Apple’s strategy to ensure you spend more within the Apple Pay ecosystem (meaning Apple takes more of a cut from every transaction you make). The presence of the physical card means when you can’t pay at a terminal on your iPhone, you can whip out the card and be on your way.
However it wouldn’t be an Apple product without its fair share of hype (think back to thousands of people queuing up for the latest gadget days before it was even released). We believe, half the reason Apple are offering this shiny, silver card is to perpetuate further engagement and excitement about their products.
What makes it different to any normal card?
In line with its minimalist form factor, noticeably missing 16-digit card numbers and 3-digit CVV numbers. Apple has stated numerous times it is a champion of customer privacy and security, and this is no different. Each time you purchase anything with your Apple Card, a “one-time dynamic security code” will be generated in order to authorise your payment.
The advantage of this is if you were to lose or have your Apple Card stolen, no one would be able to do any sneaky online transactions as there are no numbers present on it. Similarly, if you happen to misplace your iPhone and your Apple Card was stored in your Apple Wallet any purchase would still require your Touch-ID or Face-ID biometrics.
If you happen to actually need your card number and details, Apple stated during the unveiling these can be found in the wallet app on your iPhone.
Why a credit card?
One word: money. By Apple announcing all these new services, it had the choice to provide a debit card (similar to the digital Apple Pay Cash product that already exists) or go down the route of a credit offering.
Debit cards would have been a logical step for Apple as potentially far more customers would have been able to take advantage of this type of product as not everyone who wants to sign up will be eligible for a line of credit.
Sign-up will take only a few minutes all from within your iPhone with the ability to use your card almost instantly after approval. Need to update your details? Simply message the support team through iMessage to change your name or update your address. Apple has meticulously created the most customer-centric offering that will operate just as users will expect it to.
After the success of banks across the globe adding their debit and credit cards to Apple Pay, Apple has decided to enter the market all guns blazing, diving straight in the deep end with a credit card offering. To make their card a reality, Apple has partnered with industry heavyweights Mastercard and Goldman Sachs to provide assistance on the payments and banking fronts respectively.
What are the benefits?
One of Apple’s biggest pulls is first and foremost the fact that it isn’t a bank. Apple is known for premium devices and have an excellent track record when it comes to customer service. This is already leaps and bounds ahead of traditional banks that tend to be known more for their lack of customer service served with a side of unnecessary fees.
In its announcement Apple made clear they want to focus on customers having a “healthier financial life” by encouraging users to pay off the outstanding balance (rather than minimum repayments like many other credit card providers).
This doesn’t mean people will pay off their credit cards in full every month, but part of the offering will be fees “among the lowest in the industry” in addition to no sign-up, international or annual fees.
While Apple steered away from offering a more traditional rewards program, they announced 2% cash-back from every purchase that will be credited back to an account every day. This increases to 3% when spending on any Apple product or service.
Itching to sign up?
As previously mentioned, Apple was uncharacteristically loose with information about the Apple Card, simply stating it will be available “this summer”. This puts a mid-2019 date range on availability and likely will only be available at launch in America.
There is no doubt the Apple Card will be raging success for the business as it continues to expand its offerings outside of hardware. While Apple will continue to make hardware through iPhones, iPads and MacBooks, the Apple Card this symbolises a larger strategic move for the business.
It will help ensure future revenue streams for Apple and add to the ever-growing closed platform or “walled garden” that Apple has created over the past two decades, making it nearly impossible for existing Apple customers to leave.
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The Spaceship Universe Portfolio currently invests in Apple.
The Spaceship Index Portfolio currently invests in Apple.
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