Apple — the next big disruption in fintech?

The next big disruption in fintech is hiding in plain sight. Apple!

Apple as a fintech is yet to capture public memory the way other brands such as PayPal, Stripe and Klarna have. However, it is silently preparing for a takeover of the future of finance. A full-fledged fintech ecosystem is taking shape with Apple at its centre. 

Before we delve deeper into Apple’s insidious moves into fintech, let’s ponder over one question; How did Google surpass its predecessors to be the search engine of choice? Well, much of Google’s early growth is attributable to graceful partnerships, something Yahoo miserably failed to achieve at every opportunity it was presented. The outcome? Yahoo paved its way to oblivion, despite its first-mover advantages. What I’m trying to get at is that there’s a good chance that the top fintech names of today may end up being the Yahoos of tomorrow in the face of Apple strategic partnerships. 

Apple and Goldman Sachs, after jointly issuing a credit card back in 2019, recently decided to deepen their bond by creating a savings account with a groundbreaking 4.15% annual percentage yield (APY). This is a curious case given that the average APY in the US is less than 0.5%. Even more interesting is the fact that it attracted $1 billion in deposits in four days of its launch. 

The iPhone is quickly emerging to be something much more than a phone. This transformation was beautifully captured in the title of a WhiteSight article, “From iPhone to iBank” which can be accessed here.

Apple is now active in various financial segments, payments, cards, credit, and now even savings. Here’s a timeline of its diversified financial product line. 

• Payments: Apple partnered with JP Morgan Chase in the United States and introduced Apple Pay to support debit and credit cards from all three major payment networks. It has now extended its footprint to over 76 countries according to WhiteSight. 

• Cards: Apple is making its presence felt in the co-branded space. As of early 2022, it had 6.7 million users since its launch in 2019, according to Cornerstone Advisors. Apple’s proprietary credit card reportedly approves customers with moderate to low credit score in a bid to capture subprime and underserved customer segments. 

• Credit: Apple made a leap with its wholly owned subsidiary Apple Financing LLC. It was seen as an attempt at sidestepping its partners in what’s considered a lucrative business (lending). It secured lending licences across 15 states in the US to offer Pay Later services. 

• Savings: Apple‘s high-yield savings account that was unveiled in April through a partnership with Goldman Sachs, reached almost $1B in deposits in the first four days alone and 240,000 accounts in the first week. The interest rate it offers is 10 times higher than the United States national average and 415 times higher than what Chase or Bank of America offers at 0.01%. 

Besides all these, the fact that Apple is now lending from its own balance sheet for its Buy Now, Pay Later product proves that it is serious about banking. And the rate at which Apple is growing in the space is telling. Apple Pay currently has 75 percent adoption among iPhone users, up from 10% in 2016. In addition to taking on banks, Apple is also competing with Mastercard and Visa with features that allow merchants to use iPhones and iPads to send and receive payments. Clearly, Apple’s long-term goal is to replace wallets with iPhones. 

What’s your take on Apple’s pivot to fintech? Let me know in the comments section.