• Laura Socha
  • Published: 04 April 2019


What is it?

Apple Card is a no-fee, low-interest Mastercard that will launch in the United States this summer, in partnership with Goldman Sachs. It will integrate with Apple Pay for digital and point-of-sale (POS) purchases. A physical titanium card will be available for vendors who do not yet support Apple Pay. The enhanced security and innovative customer experience are cool differentiators; however, the value proposition is attractive but not differentiating.

High Cool Factor

  • Superior Experience: Near-instant sign-up, built-in interest payment calculator, AI-assisted purchase identification, real-time fraud alert monitoring and management, text-based customer service. None of these are new, but the experience is integrated and optimized by Apple.
  • Enhanced Security: Each payment will be tokenized to protect the user’s card details, and no purchasing information will be tracked or stored on Apple’s servers.
  • Ubiquitous Ecosystem: There are 383 million global Apple Pay users, and tap is pervasive in Canada. Customers invested in the Apple ecosystem will try this product.
  • Brand Power: Never underestimate the brand power of Apple and Mastercard. BlackBerry’s hubris in the face of the iPhone is a famous cautionary tale.

Longer-Term Concern to Canadian Financial Services

  • Unknown Strategy: Apple could come into market a few different ways; rent-a-bin, traditional co-branding, or change the rules entirely. They could force the hand on Open Banking. They could make a preemptive strike to stop WeChat and Alipay from gaining traction. But in Canada, expect the regulatory agencies to get involved.
  • Market Attractiveness: Canada is not the biggest nor the most lucrative market for Apple to push into next. The rollout of Apple ran twenty months later than the United States. The natural path forward for Apple may be to partner with an existing issuer, something Goldman Sachs could become to underwrite the receivables. Mastercard and Visa are likely considering what it will take to get Apple to ride their rails, potentially upsetting other issuers in market.
  • Reward Addicts: Canadians love their points and reward cards. Apple’s value proposition is unlikely to disrupt the market because it isn’t better than other offerings (it’s essentially a variable cash back card). The AI-assisted PFM and lower interest payment calculator will not be enough to keep this card top of wallet in Canada. However, it will resonate with the younger iGen crowd.

What Now?

Create better experiences—This is an opportunity for Canadian Issuers to focus on increased customer expectations. Every FI is struggling to keep pace with these rapidly evolving user demands, i.e.: “Make it better, on-demand, more personalized, and put me in control.”

Be bold—Canadian institutions need to look at the historic business model differently.  The payments world will not be complacent or obstructed. Open banking and partnerships are changing the game and FIs need to look at their role to remain relevant.

Get Agile—Canadian issuers believe they are agile, but their speed to market shows they are not. Having an agile process is not being agile. Banks need to remove internal bureaucracy and embrace accelerators and partners to win at this game

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