Tuesday , January 21, 2020

Is Apple Card the ‘Most Successful Credit Card Launch Ever?’ Some Experts Demur

There’s little doubt that Apple Inc.’s Apple Card has stirred plenty of publicity before and since its Aug. 20 launch. And it enjoys the backing not just of Apple but of investment-banking giant Goldman Sachs, the card’s issuer. But is it “the most successful credit card launch ever?”

That claim came Tuesday from David Solomon, Goldman’s chief executive. Speaking on a conference call with investors, Solomon reviewed the company’s recent efforts to expand its consumer business, referring to its progress in banking deposits on its Marcus platform as well as its venture into consumer credit cards.

According to a transcript of the call, Solomon added that “since August, we’ve been pleased to see a high level of consumer demand from the product. From an operational and risk perspective, we’ve handled the inflows smoothly and without compromising our credit underwriting standards.” 

But Solomon didn’t cite any numbers for the new card, which is made of titanium rather than plastic and is designed to work digitally within the Apple Wallet and with Apple Pay. Reached by Digital Transactions News, a Goldman spokesman said the company has no comment on the matter beyond the transcript of the call. An Apple spokesperson did not respond to a request for comment.

Experts say the new card has some high hurdles to clear if it can be said to be “the most successful credit card launch ever.” The example most often cited by historians of the credit card business is that of the Universal Card, launched with much fanfare by AT&T in 1990. The telecom company, which promised no annual fee for life at a time when such fees were common, booked nearly 5 million cards in the first nine months after launch, recalls Brian Riley, head of credit advisory services at Mercator Advisory Group, a Marlborough, Mass.-based research and consultancy firm.

The likelihood, says Riley, is that “on several measures, the Apple Card is far from the ‘most successful credit card launch ever.’” AT&T’s offering in the 1990s, he adds, set a benchmark by which the Apple Card’s launch can be measured. 

Unfortunately for AT&T, the Universal Card ended up a failure despite its fast start and despite winning a Baldrige Award for innovation. The card portfolio was sold to Citigroup Inc. later in the decade, Riley recalls. Still, the card had an impact. “AT&T’s promise of no annual fee for life set an unusual standard,” Riley says.

For his part, Solomon on the Tuesday call added that Goldman has been cautious so far with credit standards. While “we have seen a pretty spectacular reception to the card as a product,” he said, approval rates have been “lower” in the early going. “That’s a decision, obviously, Goldman Sachs is making as the bank, but we’re doing that in concert with Apple…over time, we’ll start to see better credits appear, the approval rates will go up,” he added.

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