New Apple Credit Card: Challenges and Opportunities for CUs

Apple credit card

Last week, Apple unveiled its plan to launch a new credit card in partnership with Goldman Sachs and Mastercard this summer. One credit union expert says while it’s not a huge red flag, industry leaders should pay close attention.

Apple users will be able to sign up for the new Goldman Sachs-linked card this summer through their iPhones, according to the company. It's centered around Apple Pay, the company's mobile payment and digital wallet service. The card will also let users manage spending through the iPhone's Wallet app.

The card will incorporate a one-time use authentication code protected by biometric security— "Touch ID" or "Face ID"—through the iPhone. For the actual card, it will be white titanium featuring only the holder's name etched onto it with lasers.

In terms of perks, consumers will get 2 percent cash back on Apple Pay transactions and 3 percent on direct Apple purchases. They will get 1 percent on purchases with the physical card. Rewards will be paid daily in cash. The interest rate is expected to range from 13 to 24 percent based on the consumer’s FICO score. While there are no teaser rates like those that other credit card companies and financial institutions use, the Apple card also has no fees.

Some financial experts say that Apple entering this particular financial services space might make it a formidable force to reckon with. At least one says credit unions should take a step back before making any rash decisions on how to deal with this newcomer.

“This is not a membership killer,” said John MacAllister, principal of Dorado Industries, a consulting and solutions services company with experience in banking and payment systems. He added that while the new card accentuates instant gratification, it is not realistic to think that it will take over the entire market.

“There’s never been a credit card launch that has created a sea-wave of change,” he said.

He recommended credit unions, rather than just looking at the fact that there’s a new shiny credit card on the market, should look at all the attributes of the new card as well as review their portfolio of members with credit cards—and see how to best meet the needs of members who might be willing to give the Apple card a try.

Perhaps a credit union could look at its own interest rates or see the feasibility of tying rates to FICO scores.

In addition, Apple, Goldman Sachs, and Mastercard are three brands that emphasize the high-end—so it’s pretty clear that they’re focusing on the high-end, tech-savvy consumer for this credit card.

“So as a credit union, I would be looking at my high-end members,” he said. “I would look at coming up with some products and promotions to target that demographic.”

Another area is the security. The new Apple card will generate unique personal account numbers every time it is used, MacAllister said. And it will differ from application to application. For example, if you use the card online, the numbers will be different from when you use the physical card.

So, a credit union might consider looking at its security products to see if it can provide a higher level of security that is obvious to the member, MacAllister said.

Apple’s card also features a personal financial management tool in which it informs and educates consumers on their spending habits.

“That sort of feedback from the card itself tends to reinforce utilization of the card,” MacAllister said. “I would be looking at providers of such services, to build loyalty to your card. So, every time the member uses the card, that member is informed. It becomes another bit of information that you can feed back to the member on a pretty consistent basis.”

One other thing for credit unions to keep in mind: How many people out there are going to use the new card and how many of them are ”your” members.

“It could be that that number is really small” for some credit unions, MacAllister said.

The card is not going to work with the Android system, so, say, for example, that among your membership 15 percent are Apple users. You probably don’t have much to worry about. 

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