It’s expected that David Solomon, Goldman Sachs’s chief executive officer will be on hand at Apple’s “It’s Show Time” event today, lending credence to the rumors that the tech giant and the investment bank will team up for an Apple-branded credit card. Jim Miller, vice president of the Banking and Credit Card Practice at J.D. Power, says this is interesting because of several reasons:.
° They’ll enter a highly competitive industry. Credit card issuers are chasing a relatively small group of customers who switch credit cards. In 2018, 11% of credit card customers reported that they switched to a different primary credit card in the past 12 months. The number one reason for switching cards is for a better rewards program, cited by 47% of customers.
° Apple has a strong brand and will be a good partner. Adoption of Apple Pay is low (7% of cardholders report that they use Apple Pay), so may not be enough incentive to get customers to switch. Banks have offered tools to help manage their money for years. Customers say they are interested in these tools, but few use them. However, customers who do use these tools are more satisfied. Marcus/Apple will need features that make using their new card with Apple Pay a better experience. Extra points for using Apple Pay could help. Cell phone protection, which is offered on other credit cards such as Barclays Uber Card, may be a good fit, but could conflict with the AppleCare Protection Plan.
° The new card will need to appeal to Millennials to succeed. Sixteen percent of Millennials have switched cards in the past year, so more are in the market for a new card. Seventy percent of Millennials already use mobile for the credit cards, and 16% are using Apple Pay, so innovative features tied to Apple Pay may appeal to some. Millennials are less likely than older customers to switch for a better rewards program (although it is still 35%) and are more likely to switch for better benefits, to avoid an annual fee and for lower interest rates.