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WSJ: ‘Apple, Goldman Sachs Team Up on Credit Card Paired With iPhone’

Tripp Mickle, Liz Hoffman, and Peter Rudegeair, reporting for The Wall Street Journal:

Apple currently takes a small cut when iPhone users make credit-card purchases through Apple Pay. It would get a bigger slice of the swipe fees from its own card, some of the people said. Executives also hope the card will boost use of Apple Pay, which has been slow to catch on among users and merchants.

Has Apple Pay really been “slow to catch on”? I see it (and use it) at an ever-growing number of merchants. Here’s a report from August that says almost one-third of iPhone owners used it in the last year and that it has over 250 million active users.

The Apple Pay card will use Mastercard Inc.’s payment network, which is the second-largest in the U.S. after Visa Inc., some of the people said. Cardholders will earn cash back of about 2% on most purchases and potentially more on Apple gadgets and services, some of the people said.

Shouldn’t The Wall Street Journal, of all publications, be able to state as fact which credit card has the bigger network, rather than relying on the word of “some of the people”? It’s not hard to look this up.

[Update: Dozens of readers have written to point out that I misread the above the sentence. “Some of the people” didn’t tell the Journal that Mastercard is the second-biggest credit card network; they told the Journal that Apple’s card will use Mastercard. My bad — but it’s a really poorly structured sentence.]

Banks including JPMorgan Chase & Co. have spent heavily to lure cardholders with travel points, airport lounge access and other generous perks. Neither Apple nor Goldman is eager to join that race, people familiar with the project have said. Instead, the companies are betting that Apple customers will use the card because it is better integrated into the iPhone.

Engineers are working on new features for the Apple Wallet app that would encourage users to pay down their credit-card debt and manage their balances. Executives have discussed borrowing visual cues from Apple’s fitness-tracking app, where “rings” close as users hit daily exercise targets, and sending users notifications about their spending habits. There also could be notifications based on analysis of cardholders’ spending patterns, alerting them for example if they paid more than usual for groceries one week.

My American Express card is incredibly well-integrated with my phone already.

My big question is what the interest rates are going to be. Credit cards have turned into a dirty business where people who carry a balance pay exorbitant interest rates, even if they’ve never missed a payment. And the higher the interest rates, the harder it is to pay off the balance. Is that where Apple wants Services revenue growth to come from? Charging people usurious interest rates on their credit card debt?

Maybe if this works out well, they can start making payday loans at Apple stores.

Thursday, 21 February 2019