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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, product, with the only signs of life to it, coming announced the launch of Apple Card, its credit when a transaction is made from it. card offering. While Apple CEO Tim Cook said that this would be “the most significant change in No longer! By actively and comprehensively the credit card experience in 50 years”, I initially linking the card to the mobile phone, the had mixed opinions on it. However, as I reflect geospatial and IoT potential of the mobile phone back on developments, Tim Cook may actually can be used by the card! The bank can know have a sliver or two of a valid point! where the card-holder travels, shops, spends time during the day and the list can go on! This may very well be the start of “Digital” credit cards. In one line, Goldman Sachs just found a way to Apple Card may well signify the beginning of the dip into continuous, unlimited, and potentially end of physical credit cards! Through the ages, unrestricted data usage of card holders! This is a people have been demanding easier, and secure goldmine of data! access to payment solutions. Be it barter system giving way to coins, coins to currency notes and What’s the fine-print with the card? currency notes to cards. They have been the most At the event, it was said, that the card would be common store of value and the most widespread offered by Goldman Sachs and be issued very held “things”. However, from the turn of the quickly. It was also mentioned that Goldman century, as the cellphone became ubiquitous Sachs would not share information with Apple. throughout the world, it was only a matter of Here’s what was not said though, which is time, before a way was devised to use it to store, noteworthy: receive and pay value as a “widely held medium”. So, Apple Card does have the opportunity to kick- • Not every iPhone customer would be offered a start that process. card. There would be a qualification criterion. You’d need to be qualified to be approved! The card brings (albeit arguably in limited ways, the power of IoT and geospatial data, and • There’s no mention of Apple not sharing analytics). information with Goldman Sachs Credit card till now has remained a “dumb” • 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 Exhibit B: Credit card of the digital age Two different products rolled in one, joined by powerful Customer Lifetime Value (CLV) “Data”: engine that not only will have extremely What brings together Apple and Goldman Sachs granular details, but will continue to gather is the unprecedented amount of data that will be data at a rapid clip. A significant competitive generated and can be used. advantage to Goldman Sachs! Goldman Sachs gains access to granular data, Apple, on the other hand, can use this data to going beyond just the financial transactions start learning more about its customers and (The card is on the Mastercard system/network becoming a more integral part of their lives. and offered by Goldman Sachs. All the financial detailing necessary to issue a credit card is • As Apple moves towards services-based handled by Goldman Sachs). revenue, creating stickiness with its products is crucial. • This helps Goldman’s newly launched retail • What better way to do it, than to integrate venture, Marcus, create a curated population the iPhone with customer’s financial pool to do better segmenting, and consequent transactions almost inextricably deeply! targeting and positioning of its bouquet of services. • What’s more, Apple can use this data to create rich dashboards and reports, that will keep on • It also helps Goldman Sachs create a very creating A-ha moments for its customers! as we bear in mind that Apple pretty continuous, real-time gas to the extremely much knows everything that we do. powerful CLV engine). Where we shop, frequency of shopping, social media footprint etc. Extremely What’s Apple’s play here? valuable information for Goldman Sachs Apple’s play and game changer is the Wallet app to determine your credit limit! (In short, interface for Apple Card. The app which uses Is Apple Card the revolution that redefines the future of payments? Yes and No! Page 3 geospatial data and analytics, complemented What’s Apple bringing unique to the table? What with Apple Card and Maps’ data, will let Apple is it gaining? know the precise details about our shopping Apple’s secret weapon here may be the Wallet pattern including how and where we shop. Once app – gaining real insights using geo-spatial data this is done, the entire goodie bag opens! Time and analytics But, stop here, and think about it for spent at the store, transaction size, the frequency a minute. Is this something, that Google may not of visits are just the starting points of what be able to do for, let’s say Citi or Chase? To me, information can be gleaned off this. it looks like that this is something which is really something that can be engineered by Apple’s Why is this such a revolutionary idea? rivals. Two big reasons why it is a revolutionary idea: Who’s the real gainer? • Making the card itself more intelligible in its Well, mostly Goldman Sachs! Goldman Sachs usage – designating POS machines with the gains in a couple of very interesting ways. Let’s merchant type and tracking them look at them: • Making the card generate, and use CLV • Access to a wide network of population (The data –holder’s usage patterns, lifestyles and iPhone penetration is really high in the US). preferences There would also be an opportunity to slice and dice the market segments as Goldman 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 Sachs wants (As an iPhone customer, with an customer would look for. And that was a defining iTunes id etc, a detailed history and persona game-changer about each of the customers is known to Apple)! Is Apple Card the revolution that redefines the future of payments? Yes and No! Page 4 • 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? Anupam Jain is the Managing Principal of Exaatto Group Madhur Jain is Senior Associate at Exaatto Group Is Apple Card the revolution that redefines the future of payments? Yes and No! Page 5 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. www.exaattogroup.com [email protected] https://linkedin.com/company/exaattogroup/ https://twitter.com/ExaattoG.

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