Can Apple Card financing boost the slumping iPhone?

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Apple CEO Tim Cook has called Apple Card the "most successful launch of a credit card in the United States ever." If that's true, the company is banking on it to jolt lagging iPhone sales by adding an installment payment option.

Cook has not provided the background data on which he bases his Apple Card claim, other than the card is available through an easy signup process to any consumer using a newer model iPhone and it doesn't hit users any fees.

But with numerous technology companies providing installment payment options at the physical point of sale or e-commerce checkout, Apple is turning to its own devices to do the same.
With iPhone sales lagging at nearly a 10% clip compared to last year at this time, Apple is turning to its branded credit card to possibly provide an incentive for users to buy the newest hardware.

Even though Cook was quick to point out during Wednesday's fourth quarter 2019 earnings call that iPhone sales have been sluggish in the past, the company has endured previous quarters in which the revenue from iPhones has fallen by 15%.

Still, with the Apple Card becoming a tool this year to help the company's bottom line, Cook said the company will accept payments for new iPhones through Apple Card installments.

Apple has established that cardholders can purchase a new iPhone and pay for it over a two-year period with zero interest. Cook said that option would be available to consumers before the end of the year, a signal that Apple will surely have its financing offer in place prior to the heavy holiday shopping season.

"One of the things we are doing is trying to make it simpler and simpler for people to get on these sort of monthly financing kind of things," Cook said. "We are cognizant that there are lots of users out there that want sort of a recurring payment like that, and the receipt of new products on some sort of standard kind of basis, and we are committed to make that easier to do than perhaps it is today."

As he has in past earnings calls, Cook heaped high praise on the Apple Pay mobile payment app, without providing specific user or transaction details. Apple Pay is lumped in with Apple Care service, subscription apps, Apple Music and iCloud under the company's broad services category. With hardware faltering during the third quarter, the services category delivered revenue growth of more than 40% with $12.5 billion in revenue.

"We had all-time revenue record revenues from payment services for Apple Pay, as revenue and transactions doubled year over year," Cook said, citing more than 3 billion transactions in the September quarter.

Those numbers exceeded PayPal's number of transactions and is "growing four times as fast," Cook added.

Apple Pay is available in 49 markets now and has more than 6,000 issuers on its platform. "We believe that Apple Pay offers the best possible mobile payment experience and the safest, most secure solution on the market," Cook said.

Other than noting the new Apple Card installment payments, Cook did not mention other new features for the Apple Card.

Apple Card users have told the company "they love Apple Card's simplicity, privacy, security and transparency, which has helped them make healthier financial choices," Cook added.

Apple continues to push the card as one with "absolutely no fees" and one that major application developers and retailers like Uber, Uber Eats, Walgreens, Duane Reade and T-Mobile have already joined with a 3% daily cash-back reward through Apple Card transactions.

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