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  • Banking Practice

    Is Apple Card the revolution that redefi nes the future of payments? Yes and No!

    Apple Card is a pointer of things to come. The ubiquitous credit card dons a “Digital”

    persona, and brings new features to users. And on the other hand, stealthily lays the

    groundwork of putting a tracking anklet on consumers!

    Anupam Jain and Madhur Jain

  • Apple, with much fanfare, on March 25, 2019, announced the launch of Apple Card, its credit card offering. While Apple CEO Tim Cook said that this would be “the most significant change in the credit card experience in 50 years”, I initially had mixed opinions on it. However, as I reflect back on developments, Tim Cook may actually have a sliver or two of a valid point!

    This may very well be the start of “Digital” credit cards. Apple Card may well signify the beginning of the end of physical credit cards! Through the ages, people have been demanding easier, and secure access to payment solutions. Be it barter system giving way to coins, coins to currency notes and currency notes to cards. They have been the most common store of value and the most widespread held “things”. However, from the turn of the century, as the cellphone became ubiquitous throughout the world, it was only a matter of time, before a way was devised to use it to store, receive and pay value as a “widely held medium”. So, Apple Card does have the opportunity to kick- start that process.

    The card brings (albeit arguably in limited ways, the power of IoT and geospatial data, and analytics). Credit card till now has remained a “dumb”

    product, with the only signs of life to it, coming when a transaction is made from it.

    No longer! By actively and comprehensively linking the card to the mobile phone, the geospatial and IoT potential of the mobile phone can be used by the card! The bank can know where the card-holder travels, shops, spends time during the day and the list can go on!

    In one line, Goldman Sachs just found a way to dip into continuous, unlimited, and potentially unrestricted data usage of card holders! This is a goldmine of data!

    What’s the fine-print with the card? At the event, it was said, that the card would be offered by Goldman Sachs and be issued very quickly. It was also mentioned that Goldman Sachs would not share information with Apple. Here’s what was not said though, which is noteworthy:

    • Not every iPhone customer would be offered a card. There would be a qualification criterion. You’d need to be qualified to be approved!

    • There’s no mention of Apple not sharing information with Goldman Sachs • This point needs a little more clarification,

    Exhibit A: Evolution of medium of exchange

    Is Apple Card the revolution that redefines the future of payments? Yes and No! Page 2

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    Two different products rolled in one, joined by “Data”: What brings together Apple and Goldman Sachs is the unprecedented amount of data that will be generated and can be used.

    Goldman Sachs gains access to granular data, going beyond just the financial transactions (The card is on the Mastercard system/network and offered by Goldman Sachs. All the financial detailing necessary to issue a credit card is handled by Goldman Sachs).

    • This helps Goldman’s newly launched retail venture, Marcus, create a curated population pool to do better segmenting, and consequent targeting and positioning of its bouquet of services.

    • It also helps Goldman Sachs create a very

    powerful Customer Lifetime Value (CLV) engine that not only will have extremely granular details, but will continue to gather data at a rapid clip. A significant competitive advantage to Goldman Sachs!

    Apple, on the other hand, can use this data to start learning more about its customers and becoming a more integral part of their lives.

    • As Apple moves towards services-based revenue, creating stickiness with its products is crucial. • What better way to do it, than to integrate

    the iPhone with customer’s financial transactions almost inextricably deeply!

    • What’s more, Apple can use this data to create rich dashboards and reports, that will keep on creating A-ha moments for its customers!

    as we bear in mind that Apple pretty much knows everything that we do. Where we shop, frequency of shopping, social media footprint etc. Extremely valuable information for Goldman Sachs to determine your credit limit! (In short,

    continuous, real-time gas to the extremely powerful CLV engine).

    What’s Apple’s play here? Apple’s play and game changer is the Wallet app interface for Apple Card. The app which uses

    Exhibit B: Credit card of the digital age

    Is Apple Card the revolution that redefines the future of payments? Yes and No!

  • Page 4

    geospatial data and analytics, complemented with Apple Card and Maps’ data, will let Apple know the precise details about our shopping pattern including how and where we shop. Once this is done, the entire goodie bag opens! Time spent at the store, transaction size, the frequency of visits are just the starting points of what information can be gleaned off this.

    Why is this such a revolutionary idea? Two big reasons why it is a revolutionary idea:

    • Making the card itself more intelligible in its usage – designating POS machines with the merchant type and tracking them

    • Making the card generate, and use CLV data –holder’s usage patterns, lifestyles and preferences

    To support the argument, let’s look at what Google did in travel industry by launching Google Trips and Google Flights.

    • Sabre, Amadeus etc had PNR and other information for travelers, yet they were never able to put this information together and form a composite view of the customer.

    • Google Trips and Google Flight accessed the same information as available to likes of Sabre, Amadeus, and paired it with Google ids. Once this was done, the composite customer profile was there for the taking. • Now, Google could know the places

    somebody had flown to, airline preferences and a lot of other things.

    This combined with other digital footprints left behind, would help Google know what the customer would look for. And that was a defining game-changer

    What’s Apple bringing unique to the table? What is it gaining? Apple’s secret weapon here may be the Wallet app – gaining real insights using geo-spatial data and analytics But, stop here, and think about it for a minute. Is this something, that Google may not be able to do for, let’s say Citi or Chase? To me, it looks like that this is something which is really something that can be engineered by Apple’s rivals.

    Who’s the real gainer? Well, mostly Goldman Sachs! Goldman Sachs gains in a couple of very interesting ways. Let’s look at them:

    • Access to a wide network of population (The iPhone penetration is really high in the US). There would also be an opportunity to slice and dice the market segments as Goldman

    Is Apple Card the revolution that redefines the future of payments? Yes and No!

    Sachs wants (As an iPhone customer, with an iTunes id etc, a detailed history and persona about each of the customers is known to Apple)!

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    • Easy access to an economically well-off section of the population (According to a survey conducted by SlickDeals in Oct 2018, iPhone users have higher average salary and crucially spend more across a range of categories

    • Instant stand-out and differentiation when comparing to its competitors such as Chase, Citi in a product category which is very full and saturated

    • Marketing, and positioning boost, thanks to Apple branding

    And, a rich data-set to feed into Goldman Sachs model of generating Customer Lifetime Value (CLV). Goldman Sachs may be able to get access to that data, courtesy its tie-up with Apple through the card

    Our thought-bubble: Combining a “dumb” physical credit card, with an always-on data-logging and communicating cell- phone definitely helps Goldman Sachs and Apple unearth a large amount of consumer behaviour data, that was previously inaccessible. While a by-product of this is the consumer analytics, that can help the consumer have higher clarity of his spend patterns, it also raises the spectre of the bank following you every moment of the day. Is this not then the equivalent of a “Tracking Anklet” that the bank is trying to place on the consumer?

    Is Apple Card the revolution that redefines the future of payments? Yes and No!

    Anupam Jain is the Managing Principal of Exaatto Group Madhur Jain is Senior Associate at Exaatto Group

  • Exaatto Group is a boutique global research, advisory and consulting fi rm focused on Business Process Management (BPM). It seeks to help BPM ecosystem (buyers, service providers, and facilitators) make better decisions, through its work. Its unique approach and focus on ‘digital’ and ‘industry’, helps it understand issues in microscopic detail, build the larger picture in telescopic expanse and bring meaningful, forward-looking and actionable insights.


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