Apple Terminates Credit-Card Partnership with Goldman Sachs
Apple has decided to end its credit-card partnership with Goldman Sachs as the tech giant expands further into consumer lending. According to a report from The Wall Street Journal, Apple submitted a proposal to Goldman Sachs outlining its intention to terminate the contract within the next 12 to 15 months. This termination includes the entire consumer partnership, including the credit card and savings account. This decision marks a rapid reversal for a program that was expected to be a cornerstone of Goldman Sachs’ entry into the mainstream consumer market. However, Goldman Sachs suffered significant losses in its attempts to establish a comprehensive consumer operation, leading them to inform Apple of their intention to offload the partnership.
Synchrony Financial Interested in Apple’s Credit Card Program
Synchrony Financial, the largest issuer of store credit cards in the U.S., has shown interest in assuming control of Apple’s credit-card program. Synchrony has long sought partnerships with tech companies and previously competed against Goldman Sachs for the Apple credit-card program. While this development poses a setback for Apple’s services business, it’s worth noting that the Goldman partnership represents only a small portion of their revenue stream. In contrast, services revenue grew by approximately 16% in the September quarter.
Challenges Faced in Apple’s Relationship with Goldman Sachs
The relationship between Goldman Sachs and Apple faced challenges from the beginning. Certain Goldman executives were reportedly irritated by Apple’s advertisements stating that the card was not from a bank. Additionally, Apple’s strict approval process for applicants led to increased loan losses for Goldman. The requirement to send cardholders’ bills at the beginning of the month also caused customer service challenges. Some executives attribute regulatory scrutiny faced by Goldman to its association with Apple. In response, Goldman has initiated Project Blue, an internal effort focused on addressing regulatory issues.
Hot Take: Apple’s Shift in Consumer Lending
Apple’s decision to terminate its credit-card partnership with Goldman Sachs reflects the tech giant’s push into consumer lending. This move signifies Apple’s intention to expand its services business and decrease reliance on iPhone sales. While it may pose a setback for Goldman Sachs, Apple’s revenue stream is diversified, and the partnership represents only a small portion. As Apple ventures further into lending, it will be interesting to see how they navigate this new territory and establish their presence in the consumer finance industry.
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