Welcome to Tech News Briefing. It's Tuesday, December 5th. I'm Alex Osola for The Wall Street Journal.
Four years after launching, Apple is pulling the plug on its credit card partnership with Goldman Sachs. When the companies teamed up to launch the Apple Card in 2019, it was a huge deal for both Apple and the Wall Street Bank, and for the credit card industry at large. The split has big implications for Apple's future in payments.
and for Goldman's consumer business. Joining me now to talk about it is Wall Street Journal reporter Anna Maria Andriotis. Anna Maria, let's start with some of the basics about the Apple Card.
What's special about it? So the credit card was different for a number of reasons. It charged no fees.
It pays daily cash rewards. And it syncs with consumers'iPhones to basically analyze their spending. These features were a big deal when the card was... first announced. It was also a big deal that Apple, this tech giant, which had ambitions to get bigger and bigger in payments, was now coming out with its own card.
Up until that point, Apple was most well known in payments for having Apple pay. But in most cases, what that meant for people was that they were loading their credit cards, their debit cards from their existing bank issuers. Now here came this card from Apple that was a much...
fancier, let's call it, version than a prior one that it had with a different bank. And it was partnering up with this massive Wall Street firm that was, for Goldman Sachs, this was its first step into the credit card world. 2019, this partnership launches, too much fanfare. How has it gone since then?
It depends on who you ask. Certainly for Apple, look, this has been a popular card. from sort of the public appearance standpoint, seems like it's worked out quite well.
For Goldman, the story has been a lot more complex. When Goldman launched the card, it was a really big deal and it was viewed as a massive success at Goldman. As the years have gone on, that point of view has shifted. I remember when it was first announced that Goldman got the deal, hearing from credit card executives, contacts of mine, sources in the sector at the time I was covering the credit card space.
And I was being told, oh, my God, yeah, we were in the running for it. And the financial arrangement, the economics, essentially, that Apple wanted from this deal were just something that we could not get on board with. So good luck to Goldman was basically what I was hearing. Like what? What were some of the terms of the agreement that other banks couldn't get on board with?
Number one, Apple wanted pretty much everybody to get approved. That's not so uncommon. There are big credit card partners out. there big stores and other types of merchants that want that but when that happens what the bank partner is looking at is the potential for higher loan losses like more people not paying their bills another thing the way that apple wanted and did arrange for the billing statements and the payment dates to be arranged at the beginning of every month whoever has an apple credit card receives their statement pretty much everybody received it at the same time. That is actually not normal because most banks, what they do is they make sure that they're sending out their statements on a rolling basis.
And a big reason for that is for their customer service departments to not get inundated with calls. Now imagine a situation that was playing out at Goldman where everybody's getting their statement at the same time. So customer service is inundated, addressing issues becomes a whole lot harder in a timely manner.
And what ended up resulting for Goldman in? has been regulatory scrutiny. This credit card has played a role in that.
Goldman is under investigation by the CFPB over credit card practices. The Federal Reserve is also probing. Okay, that's a lot of things going on, but everything seems like it came to a head late last month.
What happened? In November, Apple sent a proposal to Goldman Sachs to exit the partnership within the next roughly 12 to 15 months. And this proposal is for the entire partnership because in addition to the credit card, Goldman and Apple have a joint savings account that only launched earlier this year. Goldman had been wanting to get out for some time, was aware that this would be a complicated deal to offload because it's not just a credit card and because of the terms associated with their agreement. Now, really, the last 12 months have been a total shift in strategy on the consumer front.
for Goldman Sachs. In October of last year, Goldman announced that it was doing a firm-wide reorg and also that it was going to be pulling back on its main straight ambitions. So in November, Goldman told a team of people who work on its General Motors credit card that it was going to be looking to offload it. And then I heard not that long after that, that Apple sent this proposal. What does this mean for people who have the Apple credit card?
It's not like Goldman is not going to be servicing or running these programs anymore. It is, except that the exit is underway. So generally speaking, when programs change banks, the. The credit card continues to function as normal until that new bank is chosen and takes on the program.
What does something like this potentially mean for Apple's prospects for payments? Apple needs to find a bank or another type of financial institution that will be willing to become the lender on this program. Who is going to be holding the balances, the loans that, you know, as people use their credit card from month to month or for those who... actually do rack up balances, that requires finding a financial institution that is willing to accept the same terms as Goldman did or otherwise for Apple to change what it's demanding.
That was our reporter, Anna Maria Andriotis. And that's it for Tech News Briefing. Today's show was produced by Julie Chang.
with supervising producer Catherine Millsop. I'm Alex Osola for The Wall Street Journal. Thanks for listening.