Apple and Goldman Sachs: A Power Couple Love Story

Move over Beyonce and Jay-Z. There’s a new power couple in town. Last week, Apple and Goldman Sachs announced the companies would begin to test and issue an “Apple credit card” backed by Goldman Sachs. Though the announcement took many by surprise, the companies have actually been caught flirting throughout the last few years leading to some less surprised that Goldman and Apple finally put a ring on it.
So how did this marriage come to fruition? Let’s break it down.
Our two star crossed lovers first met in 2013, shocking the debt market with a record-setting 17 billion dollar non-bank bond deal. Since then, Goldman has become Apple’s most trusted investment bank and has advised the tech giant on numerous deals throughout the last 5 years.
Fast-forward three years and 400 billion dollars worth of market cap gained between the two companies later. Goldman shifted some of its focus from major corporations to consumers when the company launched an online personal loan platform, Marcus , that targets consumers who are searching for a simpler alternative to credit card borrowing. Since its launch, Marcus has been relatively successful, lending more than $4 billion in over two years, but has recently seen a slowdown in loan-originations due to concerns about the stage of the credit cycle.
Enter Apple.
Once considered one of its most promising verticals, Apple Pay and Apple Wallet is in need of a makeover. According to the Wall Street Journal and Loup Ventures, an investment and research firm, about a fourth of U.S. iPhone users have activated Apple Pay, and the vertical produced only an estimated 1 percent of the $39.75 billion in services revenue that Apple reported for its latest fiscal year. What better way to jumpstart a financial vertical with a little unknown bank called Goldman Sachs?
The Wall Street Journal broke the news through a report stating the initiative is Goldman’s first dive into the credit card space, the bank is adding customer-support call centers around the country and building an internal system to handle payments. This project has a $200 million budget, showing a significant commitment to making the partnership work. Though the budget may seem hefty and even risky considering Apple’s less than stellar track record in the payments space, Goldman believes the product will be a huge success given the partnership also opens a window to the tech giant’s immense customer base that just so happens to be Goldman’s exact target demographic for their retail lending arm.
The card itself will be connected to the user’s iPhone via Apple Wallet and will track the user’s spending and guide the user in paying down credit card debt through push notifications. Executives from both companies believe that the user being able to link their card to their iPhone will spark immediate interest leading to plenty of activations that would make the partnership a profitable endeavor.
If Apple and Goldman could offer competitive rewards, it could be a game changer. It is rumored the card will offer cash back of about 2 percent on most purchases and potentially more on Apple gadgets and services. Call it a “throw in” or an “afterthought,” but a competitive rewards program featuring Apple products could increase hardware sales putting recent struggles behind them.
While the partnership doesn’t scream “innovation” or provide any revolutionary information, it is safe to say that Goldman Sachs and Apple could become the world’s “It” couple if everything goes to plan.  One thing is for sure though–Silicon Valley and Wall Street will be watching. If this partnership is a success, we’d be foolish to think companies like Amazon, Google, Citi, and J.P. Morgan won’t jump on the bandwagon.

But until then, we’ll let Apple and Goldman be drunk in love.