I’ve been banging this drum for years. I suspect I will continue to do so. This week marked the formal “beginning of the end” of the payments and consumer banking relationship between Apple and Goldman Sachs. As reported by the Wall Street Journal on Tuesday, Apple sent the investment bank a proposal to exit from their contract within the next 12 – 15 months. Interestingly, the reporting seemed to suggest it was a failure of Goldman’s which ultimately led to the demise of the partnership. And that’s fair enough. Goldman’s strategic foray into consumer finance has failed, and the lumps it’s taken are well deserved, including the line-of-sight fire on CEO, David Solomon: the Apple/Goldman breakup comes on the heels of Goldman ending its credit-card partnership with General Motors in September, and its divestiture of pandemic-era acquisition, specialty lender Greensky, in October. But to me, Apple is getting off the hook here, especially in its capacity as a financial services company.
The immediate market reaction to the announcement was, “who is going to now step in and take Goldman’s place? who will support Apple Card and Apple Cash?”
I say there will be candidates, but not a lot. Why? Well, as I’ve been saying for years, Apple’s attempt to leverage payments to boost services revenue has been misguided, and more importantly, antithetical to its own core, corporate philosophy. And this will be problematic for any bank partner.
Payments, consumer banking, and financial services are racing toward decentralization and inclusion, two ideals that have never been a part of Apple’s corporate DNA. Apple products and services are exclusionary by virtue of the price points, and highly centralized, by virtue of the market power and prohibitive business practices that Apple continues to wield. To wit, just last week, not the EU, nor the FTC, but consumers filed a lawsuit against the technology giant for anti-competitive practices related to peer-to-peer payment interoperability issues with Venmo and CashApp.
In a world throttling toward a future of decentralized finance, Web3 architecture to diminish and take back the market power that’s been yielded to Big Tech platforms, and open banking, which is effectuating the same with legacy financial institutions, Apple, the great technological wall builder, will continue to find itself on the outside looking in.
Was Goldman proficient at consumer finance? No. But then again, what bank could have been a good partner for Apple, where the banking relationship was such that it got bullied into paying above market interest rates on savings accounts, and accepting below market underwriting standards for onboarding (the latter to ensure that Apple had recourse to exercise its setoff rights to take payment for any other Apple products/services money an account holder owed)?
Understanding the nature of Apple’s ethos, and its albeit short history as a consumer finance player, Apple should not seek to find another bank partner. It should either acquire a bank, or build its own.
…rat-a-tat-tat
