As we enter Apple's next event, there are tons of stories jumping around the company's future growth in services. Right now, everything is centered around their upcoming video and news subscription services, but a lesser history from earlier this week points to another service that can dwarf everyone else. According to the Wall Street Journal, Apple and Goldman Sachs are getting ready to collect a credit card.
So what's the big deal? It's the quieter businesses that have been growing areas for Apple in recent years. Remember when people rejected Apple Watch? Now Apple has the only smartwatch ecosystem of any importance left. And while there are still many niche players focused on training tracking, Apple is now slowly, but surely, using Watch as a launch pad to help bring the broader mobile health care system to itself.
The technology also pushed on AirPods when they were announced, too. Not much longer, but as an item with such a small price tag, they are still overlooked. Still, Apple's small AirPod has become the fastest growing product the company has ever produced, so not too bad. They also point to a potential major role for Apple in the wearables in the future.
Here's another "quiet" area of Apple that actually goes gangbusters-Apple Pay. It made a big splash when it was released, but quickly disappeared into the background, as several banks and dealers have slowly accepted it. A few days ago, Loup Ventures launched a report detailing Apple's growing adoption and success. Apple Pay is now in use at over 900 million units and has experienced 1
According to Loup's numbers, there is also a lot of room for continued growth. While Apple Pay still shows exponential gains some years out, it's currently only enabled on 43% of iPhones. It is also interesting that Apple Pay seems to grow faster abroad than in the United States. There are still many legs left in Apple Pay as it stands right now.
However, Apple is not standing with Apple Pay. Where are they headed next? Apple has made natural progress towards a much larger role in economics. They started with Apple Pay, which got them into the mobile payment game pretty early. Then they came in peer-to-peer payments last year with Apple Pay Cash, which was a smart way to expand Apple's appeal. Apple has made loans to its iPhone Upgrade Program through a third party for some years now. Now it seems they are moving to get in on credit cards. Can you see where all this goes?
I've listened to Alex Lindsay talk about Apple cutting out the middleman and becoming a full-fledged bank at MacBreak Weekly for a few years now, and he's not the only one. It looks like they can be on the right track. Before going there, let's back up a little and look at why a credit card will work for Apple. I have used several bank and credit cards and websites over the years and most of them suck most of them. I have little doubt that Apple could do some better and more user-friendly, or any other competent technology company, for that matter. But what sets Apple apart from the rest of the big technological players is their attitude towards the user's privacy. Users will be more likely to rely on a company that does not play fast and loose with their data, and there are few areas where this is more critical than personal finance.
So what gets Apple out of all this, both in the short and long term? First off, money. Potentially a lot of money. They already take a cut on Apple Pay transactions, but they get an even bigger cut on credit card payments. Also, mobile payments are not for everyone. Nor are peer-to-peer payments. Everybody covers different user groups, but there are still many people that Apple does not now. A credit card is the second best step for Apple to appeal to those who prefer to adhere to a more traditional approach to money management.
The other thing Apple can get from expansion to credit card onwards is even closer to their customers. This is exactly what Apple's current growth in services is based on, and they can use it to help start a credit card. But if this works, there will be a greater role in the user's financial life on another level. It would bring Apple more money from purchases that have nothing to do with them and will also help feed their other services. It's not hard to imagine Apple offering discounts and service packages to customers using credit cards and other financial services. It can lead to an interesting feedback path.
In the long run, a credit card on me looks like the next logical step for Apple in a move to become a full-fledged financial network. They can never become a stand-alone bank and just stick to working with existing companies like Goldman Sachs, but I think it's obvious they will continue to expand their financial services beyond what they offer.
If Apple really wants to be a bank, they could pull it off. The company's cash position and prestige put it in a unique position to become a major player in international finance. I don't think they will go that far, but it's an interesting opportunity. Whichever direction they choose, if Apple could only bring a significant percentage of its own device sales internally, it would be a big coincidence for them. If they can get a number of customers to use them as their primary cash management platform, profits can be huge.
I'm sure Apple will make good money on their upcoming video and news offers. They already provide solid and growing profits with the Apple Store and Apple Music. But make no mistake, Apple's biggest money making opportunity in services is with Apple Pay. What we have seen and what is likely to come soon in the form of a credit card is just the beginning.