Recent rumors have suggested that Goldman Sachs intends to end its financial partnership with Apple, and Information shared a new report today about what went wrong and why the relationship between the two companies fell apart.
Goldman Sachs is Apple’s partner in Apple Card, Apple’s savings account that is open to Apple Card users, and Apple Pay Later, Apple’s buy now, pay later service that is in beta testing. Apple and Goldman Sachs have worked together since the Apple Card launched in 2019, but the company isn’t generating enough money for Goldman Sachs, and Goldman Sachs’ customer service issues with the Apple Savings account are hurting Apple’s reputation.
Former employees of both companies who worked on Apple Card said executives weren’t prepared for how difficult it would be to combine Apple’s West Coast technology focus with Goldman’s New York-style banking culture. While Apple focused more on fancy technology and product dynamism that drew customers in and kept them happy, Goldman prioritized regulatory compliance and profitability.
Apple had many demands that were atypical for credit cards and led to development issues prior to the release of the Apple Card, including statements that aligned with the calendar month, instant cash back rewards (were not released), and physical card design and customer agreements.
In an anecdote related by Information, Goldman Sachs and Apple ran into an obvious problem. Apple CEO Tim Cook was testing the service and was unable to get approved for an Apple Card. Goldman Sachs’ underwriting process rejected his application because he is a high-profile figure who regularly impersonates himself, and the marks on his credit bureau accounts caused problems.
Goldman Sachs was able to make a one-time exception, but internally, there were other issues Goldman Sachs was dealing with that eventually led to an investigation by the US Consumer Financial Protection Bureau (CFPB). Goldman Sachs ended up with more disputed transactions than anticipated, with clients receiving conflicting information or long wait times for dispute resolution.
Shortly after the launch of the Apple Card, Goldman Sachs was also investigated for how it provided credit limit increases following reports of gender discrimination. Goldman Sachs was eventually cleared of gender bias, but the situation created tension with Apple. The company also had problems with inaccurate account statements, delays in posting payments and problems with credit reports.
Goldman Sachs now aims to move away from consumer banking. He wanted to hand over Apple’s partnership to American Express, but Apple Card has to work on the Mastercard network until at least 2026 according to an agreement Apple and Goldman Sachs struck, and American Express has its own payment network. Apple also has to approve any new partners, and the sources they spoke to Information have suggested that few companies would be willing to accept Apple’s terms.
Because Goldman Sachs was new to consumer banking and eager to strike a deal with Apple, it’s not collecting the fees it would normally get in a partnership for a credit card. Goldman Sachs does not receive a portion of the fee that merchants pay to Apple to accept the Apple Card. Retailers pay a percentage of each transaction when they accept a credit or debit card payment, and Goldman Sachs does not get any funds from this.
Goldman Sachs cannot charge annual fees, late fees, or foreign transaction fees because the Apple Card does not charge these fees. Apple does pay for the Daily Cash users earn, and Goldman Sachs can make money on loans made to cardholders who split purchases of Apple products into installments, but it’s not earning enough to make the deal attractive to a new partner.
Apple could decide to partner with a lesser-known bank to handle regulatory functions while Apple takes over underwriting, fraud prevention, and customer service, but it’s not yet clear if that will happen. Information He doesn’t think Apple and Goldman Sachs can maintain their relationship, and the report suggests it could take around 18 months to dissolve the partnership.
More details about the relationship between Apple and Goldman Sachs can be found at InformationThe full report.