What Apple Card did next

Apple MasterCard Google Visa — Imagine Apple is dedicated to innovation in financial services, then this is what they will do next

This article originally appeared in Medium for more please click here.

All the excitement and commentary on Apple and MasterCard’s recent news on the launch of content subscriptions and Apple Credit has focused on what it is, not what it will be. Its my belief rightly or wrongly that this is the start of what will be possibly, but by no means guaranteed, an interesting journey.

Side note: Kudus to MasterCard for securing this deal, interesting to see if Apple dual source with Visa in other markets like Europe or Asia Pacific or this is really a global deal.

First we need to understand the drivers behind the launch of Apple Credit. It is, I believe, a response to the falling sales in Smartphones and other devices and not related to Apple Pay in a strategic sense. In other words I doubt the genisis of Apple Credit was “how to we drive usage of Apple Pay” but rather “how do we sell more iPhones and iPads”.

The potentially catastrophic fall in device sales volume especially smartphones has been caused by consumers pushing out upgrade cycles in response to less rich upgrade offers by Carriers, increasing prices and lower perceived value of incremental features.

Content and services can potentially add value to the hardware where features and functionality have already reached the law of diminishing returns. Credit, payment and other financial serviceds can act as a vital link between the hardware and content/services creating a unified and compelling value proposition and consumer experience, securing repeat upgrades and raising barriers to churn.

Imagine if you will that Apple is truly dedicated to innovation in financial services, then this is what I think could happen.

1. Tiering

Current offer drops the Titanium card reducing costs and becomes an entry level product.

AppleCare+ coverage included on any purchase of Apple devices (its insurance and extended warranty program that would otherwise cost $149 or $7.99 a month).

Premium World Elite introduced for those with good credit. In addition to AppleCare+ on devices bought with the card. Issued with a Titanium card and free subscription to Apple TV and or Apple Music and other premium content and services such as Cloud Storage.

Apple has always excelled in keeping things simple so I don’t think we will see much in the way of rotating categories of tiered up incentives or points catalogues etc. but rather more structured benefits that are easy to understand and access.

Premium World Elite would come with a richer cash back for non-Apple Pay spend to compete as a primary card e.g. up to 2%.

2. Lifestyle Benefits

Something missing from the Apple Card that Uber did really well is Gen Z lifestyle benefits specifically 4% on Dining and 3% on Travel — these very much focussed on capturing those using UberEats (and their competitors GrubHub, Doordash and Instacart — a rapidly developing market) and AirBnB users.

I think this will be addressed certainly in the higher tier card but really should be across both products. IMHO Apple Card should have tiered up cashback for any Apple Pay spend on transit (Uber and Lyft), Food (GrubHub etc.) and travel (AirBnB). This put together with consumer products and digital entertainment will make it a true primary card contender.

3. Hardware as a subscription service

Apple has an existing iPhone upgrade program — it would make sense for this to be sweetened further for those using their own credit card given that will save them merchant fees but it would also create a mismatch with what is in the market.

There is an opportunity for the installment payment feature on the exisitng card to be extended to all Apple Products with differential pricing making it cheaper or even free to buy any Apple device with 24 months credit and a planned upgrade cycle.

Even more ambitious might be whole household bundles where all Apple hardware can be bought as a subscription with a planned upgrade cycle with the ability to customize the core bundles as needed. This could easily extend to Apple Compatible products such as home security and other IOT applications.

3. Content bundles beyond Apple branded ones

Beyond own subscription services like Apple Music, Apple TV the Apple ecosystem supports the largest and most mature app store and content via iTunes. There has been a growing backlash in the costs of selling digital content on app stores with Fortnites Epic Games being the most aggressive in trying to circumvent what has become a virtual duopoly with Google.

The main focus of Apple Credit in the near future will be around tying in device sales and increasing consumers perceived value in the device experience. However Apple has the ability with Apple Credit to change the narrative with the apps and content owners that power the ecosystem.

We could see content bundles being created that aggregate various paid for apps and content or a credit system that Apple Card users get each month for use in the App Store or iTunes driving usage of these properties. This is a bit more of a stretch but certainly in the realms of possibility.

So if this is a possible vision of the Apple Card to come what might Google’s Response be?

The differences between the two businesses is considerable. Google is not suffering from the same issues as Apple in the Smartphone and other device sectors. Their business is just not as dependent on hardware. So the major driver for Apple Credit is significantly less motivating for them.

That does not mean there is not a potentially important role for payments and financial services in the Google ecosystem just that its likely to be very different from Apple if there is.

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