Branding can overcome Apple Card's gaps
With Apple Card Apple is looking for more penetration of Apple Pay at the merchant level and ways to reduce fraud.
Those are great goals for Apple, although usually more tangible benefits for consumers are included with Apple’s own interests, and the cash-back and reporting features are standard fare in the card business today.
Apple Card is a natural extension of the various payment solutions Apple offers (iTunes, Apple Pay Cash, Apple Pay, Apple Wallet. While there is some very nice integration with the iPhone, 2% Apple Pay cash back (the most stand-out figure for daily use), and excellent security features, one needs to ask who these really benefit?
In examining the card’s functionality, tighter integration with the iPhone is nice, although any major credit card can already be added to the Apple Wallet, so one does not need Apple Card for that.
While some consumer spend goes through Apple Pay at the POS, which earns 2% cash back, I would contend that rewards on several Chase or Citi cards or Amazon Prime (with a fee) will be considerably more valuable for most Apple iPhone users.
The security feature is indeed great for reducing fraud, but that is rarely the consumer’s problem. The card company eats fraud charges, and if the card is too hard to use, other card companies with similar or better rewards programs have lower barriers to use.
The lack of a readily accessible card number (no number appears on the card) isn't a consumer benefit, and in fact can be a burden to anyone who has ever had to read off or enter their card digits to complete a card transaction over the phone or on a website.
The Apple customer typically has not been a price-shopper, so I’m not sure that the 3% discount on an occasional Apple hardware purchase is going to be a game-changer (1% on the other non-Apple Pay charges). Hopefully the budget analysis function will be a winning feature and we’ll all get smarter about our spending habits.
No serious Apple observer would confuse Apple with a technology innovator. It was not behind the first MP3 player, TV streaming service, nor smartphone. Apple Card is decades behind the first credit card. Apple is an excellent marketer and excellent contract negotiator, along with changing how music, TV, and smartphones are used and paid for. I see no such innovation in Apple Card, however.
To be fair to Apple, they know they do not need to be first, and as Steve Jobs (obligatory Steve Jobs quote) famously said, “... we have always been shameless about stealing great ideas,” and credit cards are a great idea.
So, while its security features and real-time transaction reporting are not new, I would not bet against Apple Card, but rather I will wait for its full potential to be revealed.
I imagine that existing loyalty and points card issuers are breathing a sigh of relief at the details of Apple’s initial offering. I expect Venmo’s recent announcement of an entry into the credit card market will prove to be a more challenging competitor, and will look forward to more details emerging on that program.