Tim Cook says Apple Card is a game changer. Experts are not so sure

Posted at 10:38 PM, Mar 25, 2019

Apple CEO Tim Cook said Monday that the tech company’s new credit card would be “the most significant change in the credit card experience in 50 years.” But not everyone’s buying it.

The card, which will push users toward Apple Pay, offers a run-of-the-mill suite of spending rewards and other offerings, and the security features — while laudable — don’t move the needle, according to analysts.

Apple’s first credit card will debut this summer in partnership with Mastercard and Goldman Sachs, the issuing bank. Notably, the card is built into the iPhone’s Apple Wallet app, and a physical, laser-etched titanium card is optional. The card has no annual or foreign transaction fees, and will allow users to track spending by category on their phones. Cash back registers daily.

All that adds up to a series of incremental improvements to the ecosystem in which customers make payments, monitor consumption and pay their bills. That’s likely to attract brand diehards. But it’s too soon to say if it will be enough for Apple to break through a crowded field.

“It’s a very full and saturated market,” said Lisa Ellis, partner at MoffettNathanson and head of its payments, processors and IT services business. “The question is, what would make people go and get a new card?”

Apple Card was part of a series of announcements from the company Monday, when Apple introduced several fee-based services to hedge against declining iPhone sales. Its expansion into financial services leaves the door open for more product launches. It could also bolster use of its mobile wallet and Apple Pay.

But the industry response was underwhelming.

“This is a classic co-brand card,” Ellis said.

Most significant is the card’s integration with the iPhone, and the built-in tools for monitoring financial health, analysts said.

Customers may apply for an Apple Card directly in the Wallet app. They can start using it immediately if they’re approved. And while a number of popular apps already help people categorize their spending and manage their budgets, Apple could get a lift by providing a friendlier user experience.

“If consumers really like that, then you could see [interest from] a broader swath of consumers who aren’t already zealot Apple Pay users,” Ellis said.

Less likely to attract new customers: the rewards scheme.

Companies like JPMorgan Chase and Citi have in recent years lured new customers with lucrative sign-on bonuses and rewards for spending on dining and travel. Apple’s offerings are less exciting: 3% cash back on Apple purchases, 2% when using Apple Pay and 1% when using the physical card.

Apple’s decision to stay out of the reward wars could be a smart move, since one-upmanship has proved expensive for other firms, said Chris Kuiper, an analyst at CFRA Research who covers credit card companies. But rewards are a standard draw, and Apple’s cash-back benefits are “middle of the road,” he said.

On security, Apple does offer benefits, though the underlying technology isn’t new. Apple already relies on two-factor authentication for Apple Pay, which right now allows users to put other credit cards in their digital wallet. You have to be logged in from your own device and greenlight a purchase with a face ID or a fingerprint.

Apple says the card offers more privacy than others, both because Apple isn’t tracking the transactions and because Goldman Sachs has agreed not to sell or share user data for marketing or ads.

Apple’s bet may be that the barrier to entry is low enough for curious customers to give Apple Card a try. Even if it’s not their primary credit card, that could still be a win — especially if it means use of Apple Pay and Apple Wallet goes up. (Apple will load cash rewards onto customers’ Apple Cash card, which could keep people in the system even longer.)

“Their base is big enough that [it] could still be significant,” said Max Abramsky, associate analyst at CB Insights.

Apple Card’s success would be a positive development for a company that’s struggling with sales of its flagship device.

But is the card revolutionary? Not quite.