Apple will terminate its credit card partnership with Goldman Sachs, a well-known Wall Street investment bank, people familiar with the matter said. Goldman Sachs had hoped to use Apple's credit card to expand into consumer lending, but that effort has now suffered a fatal blow. According to people familiar with the matter, Apple recently made a proposal to Goldman Sachs to terminate the contract in approximately 12 months to 15 months. The end of the collaboration will cover the parties' entire consumer partnership, including the credit card launched by the two companies in 2019 and the savings account launched this year.
It's unclear whether Apple has found a new issuer for its credit card.
Goldman Sachs can't hold on anymore
The two companies' parting ways signal that the consumer finance partnership has undergone major changes. Just over a year ago, Apple and Goldman Sachs extended their cooperation until 2029. This project was also regarded by Goldman Sachs as a pillar to enter the consumer business field.
Around the end of last year, Goldman Sachs had the idea of withdrawing from the cooperation.At the time, Goldman Sachs had lost billions of dollars trying to build a full-service consumer business. Earlier this year, Goldman Sachs told Apple it would seek to exit its partnership. Generally speaking, in this kind of partnership, the merchant will control the say. In cooperation with Goldman Sachs, Apple takes the lead.
Goldman Sachs has held discussions with American Express about the possibility of handing over the Apple Credit Card program to American Express. However, American Express expressed concerns about several aspects of the partnership, including credit card loss rates. It's unclear whether those discussions are continuing.
In addition to American Express, consumer financial services company Synchrony Financial has also been studying the possibility of taking over Apple's credit card business, people familiar with the matter said. Synchrony, the largest issuer of store credit cards in the U.S., which lends to a wide range of customers, including consumers with lower credit scores, initially competed with Goldman Sachs for the Apple Card project. For years, Synchrony has tried to position itself as a card issuer with strong ties to technology companies, naming Amazon and PayPal as its largest credit card partners.
Impact on Apple
For Apple, the termination of its cooperation with Goldman Sachs is a setback for its services business.As iPhone sales begin to slow, the company is increasingly relying on its services business. However, the partnership with Goldman Sachs is likely to account for only a small part of its revenue stream. In the fourth fiscal quarter ending in September this year, Apple's overall sales fell by less than 1% year-on-year, while services revenue increased by approximately 16%.
In contrast, Goldman Sachs was more affected. The investment bank's main business has always been to serve large companies, investor clients and the super-rich. It originally hoped to enter the consumer field and diversify its business through cooperation with Apple's credit card. However, this effort failed, and ending the partnership with Apple was a major setback. Now, Goldman Sachs is returning its focus to its core clients.
Goldman Sachs also told employees in November that it planned to end its other credit card partnership with General Motors. GM is expected to begin a search for a new card issuer. In October, Goldman Sachs agreed to sell GreenSky, which specialized in home improvement loans, to a group of investors, stopped making personal loans and sold off most of the loan balances.
full of contradictions
In fact, the partnership between Goldman Sachs and Apple was not smooth from the beginning.Apple angered some Goldman Sachs executives by saying in ads that its credit cards did not come from banks. Apple has been pushing Goldman Sachs to approve nearly all credit card applications, driving up Goldman's loan losses.
Apple also insisted that cardholders receive their bills at the beginning of the month, causing Goldman Sachs customer service staff to be inundated with calls from cardholders. Typically, most credit card programs send bills to cardholders in batches to avoid this confusion.
and,Some Goldman Sachs executives privately blame Apple for the regulatory scrutiny the bank has come under.Goldman disclosed last year that the U.S. Consumer Financial Protection Bureau was investigating its "credit card account management practices," including how the bank resolved billing errors and refunded cardholders.
Meanwhile, the Federal Reserve has been investigating Goldman Sachs' consumer lending business more broadly. Goldman Sachs is moving employees from its consumer lending unit to an internal program called Project Blue, which is tasked with solving regulatory problems.
Goldman Sachs is also trying to keep employees in the credit card business until the company sells the Apple credit card project. The bank told employees at its credit card partnership business this month that they would be eligible for compensation equivalent to one year's salary if they were laid off. Goldman is expanding the program to select employees, including those in its legal and engineering departments who do not work in the consumer lending unit but whose primary focus is serving the unit's needs. (Author/Xiao Yu)
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