Will Apple-Goldman Sachs Partnership Usher in Banking Disruption?

In the last few weeks, the global tech giant, Apple has been in the news repeatedly, and for the right reasons. On the one hand, Apple opened its first two retail stores in the Indian market. On a global front, news that unraveled disruption potential for the banking industry came in the form of the announcement of the Apple-Goldman Sachs partnership for Savings Accounts, although currently limited to the USA region. Overall, there has been a decline in terms of confidence in banks among consumers in the USA. A research by Gallup on “Confidence in Institutions”, shows that only 27% of Americans reported to have a ‘great deal or quite a lot of confidence’ in their banks, which shows a decline since its peak of 60% in 1979. Therefore, this partnership announcement seeks to breed greater trust and credibility for the consumers.

Being a tech giant, Apple doesn’t technically have a banking license and will be operating through Goldman Sachs USA, which is FDIC-insured. Therefore, all regulatory compliance will be routed through Goldman Sachs. Currently, the benefits of this new era of banking, which we will discuss shortly, are limited to consumers in the USA and the only prerequisite is possession of the Apple Card, while all other features can be configured with the Wallet app.

Apple: Strengthening its position in financial services

The savings bank that has resulted from this partnership is not Apple’s first move into the financial services industry. In fact, even the Apple-Goldman Sachs partnership dates back to 2019, when the two giants together launched the Apple Card, a game changing credit card, which has now become the foundation of this savings account.

Apple also introduced its own Tap to Pay or what we call Apple Pay, which enabled merchants to direct accepted payments from their iPhones. Since, Apple’s Tap to Pay is limited to iPhone, it gives the company a greater influence when it comes to conversations with card issuing banks.

The company also introduced a Buy Now Pay Later functionality (Apple Pay Later) which allows Apple users to pay for their purchases over time. Customers can use the Apple Wallet to pay off their loans in up to 4 installments at no interest or fees. And finally, the company launched this savings bank account.

Overall, penetrating into different areas of financial services, Apple continues to provide greater comfort to its customers, and gradually be a greater part of their overall journey. Invariably, with deeper penetration, Apple is truly giving a new meaning to the future of fintech by offering a flywheel of financial services, which its customers will grab quickly, powered by its agile and innovative technological prowess.

What’s in it for the customers?

In addition to the trust that consumers have for Apple, this new banking avatar brings along some tangible outcomes for the customers:

~10x interest rates

While most of the other commercial banks are offering less than half a percent of interest rate for savings accounts, Apple card users will be eligible for an interest rate of 4.15%, which is almost 10 times the American national average.

No minimum requirements

As opposed to the huge list of requirements that most traditional banks have, this banking disruption comes with benefits of no minimum deposit amount, no fees and no minimum balance requirements. Invariably, the only requirement is the Apple Card.

Unparalleled convenience

Generally, banks require a lot of paperwork and administrative hassles to open bank accounts. However, in this case, the Wallet App which fuels savings accounts with Apple comes pre-installed in iPhones which can be used to set up the account with a few clicks in a few minutes.

Expansion of other financial services by Apple

As mentioned, this isn’t Apple’s first financial offering. Obviously, there’s the Apple Card, but the company also offers a Buy Now Pay Later functionality, allowing users to pay for services in up to four installments at zero interest. At the same time, Apple Card users are eligible for a 3% cashback on each purchase through the card. That cashback will now be transferred to this savings account, enabling users to earn interest on it.

Armed with such benefits, within the first couple of days, Apple’s savings accounts received deposits worth almost 1 billion and 240,000 new accounts opened within the launch week. This clearly indicates the huge potential of financial innovation that has been unlocked with this partnership.

Unlocking Disruption in Banking

Undoubtedly, this partnership will unveil disruption in the banking space across levels and layers. Here’s what it is likely to bring along:

New synergies in financial sector and tech

The new savings accounts from Apple-Goldman Sachs will definitely be a game changer for the traditional financial-tech partnerships. It will be interesting to see how they manage to balance the stability and prudence of financial institutions with agility and disruption that is the trademark of the tech giant. Furthermore, no minimum requirements also gives the picture of making banking more accessible to everyone, and not limited by bank balances.

Impact on other banks

Naturally, this will impact and disrupt traditional banking. On the one hand, it will entice the 2 billion+ iPhone users to switch to this savings account with the Apple Card (currently only~10% of iPhone users use Apple Card). This might lead to a market capture disturbance with Apple taking a higher share, especially posing a challenge for smaller banks. On the other hand, it might fuel agility and innovation among other banks that are likely to see Apple’s entry as an incentive to transform.

Digital first banking experiences

Undoubtedly, this partnership will unlock unparalleled customer experiences for consumers seeking digital first banking. Playing on its strengths, the tech giant is steadily adding more financial services to its flywheel. Furthermore, its partnership with Goldman Sachs is giving Apple the access to cutting-edge banking infrastructure, combined with its tech platform has the potential to provide customized banking experience to its customers, at a lower cost.

This partnership will definitely accelerate the ongoing move of banking away from traditional brick and mortar banks to create more intuitive and personalized experiences. Invariably, this will usher in a new age of digital native banking.

Prateek Tokas
Prateek Tokas

Disclaimer: The views expressed in this feature article are of the author. This is not meant to be an advisory to purchase or invest in products, services or solutions of a particular type or, those promoted and sold by a particular company, their legal subsidiary in India or their channel partners. No warranty or any other liability is either expressed or implied.
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