Bias probe or not, the Apple Card sets a new standard for lenders
Despite recent accusations of bias, Apple Card seems to be setting the bar for the credit card industry.
Financial institutions and fintechs used to frequently say they need to be like Uber, with its simple, easy to use app, because that's who consumers compare them to. Today, many refer to Apple instead.
“Apple Card is a definite shift in the market,” said Vaduvur Bharghavan, president of Ondot, a technology provider to card issuers. “Whether or not they succeed in terms of winning significant market share, they’re going to transform the way banks think in terms of offering interaction with their customers. The way consumers expect to interact with issuers has already changed and will change.”
Justin Olson, vice president of information technology at Utah Community Credit Union in Provo, agreed that “Apple did something really interesting and I think it's slick. It does change things a little bit.”
To be sure, Apple Card's launch has had its bumps. Just last week, a tweet accusing the card of being biased against women went viral, picking up interest from Apple co-founder Steve Wozniak, who gave credence to the allegations. The New York State Department of Financial Services is now looking into the claims.
And the card experience Apple and Goldman Sachs built, including instant issuance of a virtual card, spending insights delivered through a mobile app and push notifications, isn’t new — Visa and Mastercard have enabled the instant issuance of virtual cards for some time. Banks and other traditional financial services companies have also been working to improve their customer insights, notifications and apps overall.
Still, Apple Card is accelerating a trend of giving cardholders a more digital-savvy product.
Applying for and receiving a virtual Apple Card can happen in under five minutes. Personal information on the application is often pre-populated and after receiving the card, an Apple device will ask if it should be the preferred card in Apple Wallet.
The instant issuance and the ability to use the card immediately “is a big deal,” said Kalpash Kapadia, CEO of Deserve, a fintech that offers credit cards to immigrants and millennials and also offers its card platform to banks. Goldman Sachs recently invested $50 million in the company.
Physical cards are beginning to feel like an afterthought. (The Apple Card, made entirely of titanium, costs around $60 to make, according to some estimates.)
“The physical card is going to be" replaced with the virtual card, "the way mailing a DVD [was supplanted] by Netflix, in five years,” Kapadia said.
Deserve and OnDot both offer software that lets FIs offer credit card applications to prequalified customers through its mobile banking app or a separate app, with digital-first instant issuance.
Jason Gardner, CEO of Marqueta, said his was the first company after Square and Apple to offer the ability to instantly issue a card into Apple Pay. Marqueta’s platform is used by fintech and tech company disruptors including Affirm, Kabbage and Square.
“I can send you money on Square Cash, you can instantly generate a virtual card, drop it into Apple Pay and pay at the point of sale,” he said.
Every time a customer opens the Apple Wallet, they can see their total balance, a small chart of weekly activity and the date of their next payment. Users can also get notifications when their bill is due.
“I have been using the card for the past three months and it's a pleasant experience, in terms of both using the card and getting the payment reminders and due date that motivate good credit behavior,” Kapadia said.
Gardner sees Apple among a crop of tech and fintech companies trying to provide a better card app.
“Better designed products that create a good user experience are dominating right now, whether it's Square Cash, N26 or Chime,” Gardner said. “Apple, which obviously is very well known for hardware design and user experience, is now moving that to a card and financial services. We're finding incredible adoption of well-designed products taking out all of the nonsense and making it mobile.” (By nonsense, he means ads for other products.)
The newfound focus on design is being applied to help people manage their financial life, pay their bills, deposit checks and see transactions.
Kristen Berman, a behavioral scientist and co-founder of Irrational Labs and Common Sense Lab, a Duke University initiative dedicated to improving the financial well-being for low- to middle-income Americans, said her organizations like what the Apple Card app does for financial wellness.
“They put it in your face how much money you’ve spent,” she said. “You open your card and you see your balance. With a physical card, you don’t see it. While Apple has made the pain of paying lower by having the Apple Wallet on your phone, they’ve increased the pain of paying with the friction of seeing the balance.”
Berman also likes that the Apple Card defaults the cardholder to paying the monthly balance in full.
“When you’re paying in full, this is wildly a better anchor than the minimum for most people,” she said. “And you’ll have pain of paying because you’re paying more each month. They give you totals on your weekly spend, which is easier [to understand] than monthly. So I think there are ways to do easy better, and I think Apple is a nice example of that.”
Accusation of bias
The recent tweetstorm and subsequent regulatory investigation into Goldman’s underwriting practices raise an issue that is not unique or Apple or Goldman: spouses are evaluated independently for credit.
The two people who said Apple Card discriminated against their wives are tech moguls. David Heinemeier Hansson is a Danish programmer who created Ruby on Rails. He has a net worth of $40 million. Apple co-founder Steve Wozniak is worth more than $100 million.
When one spouse has a high salary or accumulated wealth and others in the family use that person’s credit card as authorized users, the creditworthiness of those family members is evaluated differently because they are not legally responsible for that account. And if a spouse maintains their own credit card accounts, their creditworthiness will be assessed on their own income, wealth and debt-use behavior. If one spouse has a lower income or less wealth, chances are, they will have a lower credit limit.
Goldman Sachs has said it evaluates each application independently.
“We look at an individual’s income and an individual’s creditworthiness, which includes factors like personal credit scores, how much personal debt you have, and how that debt has been managed,” the bank said in a statement. “Based on these individual factors, it is possible for two family members to receive significantly different credit decisions.”