Apple Waves Goodbye to Goldman Sachs: The Card Partnership Comes Crashing Down
Goldman Sachs and Apple to part ways in credit card venture
Goldman Sachs and Apple to end credit card partnership
Tech giant Apple has delivered a brutal blow to Wall Street heavyweight Goldman Sachs, revealing plans to end their once-promising joint credit card venture. According to inside sources cited in a recent Wall Street Journal article, Apple intends to sever ties with Goldman over the next 12-15 months, effectively crushing the bank’s ambitious dreams of dominating the consumer lending market.
Launched in 2019, the Apple Card was Goldman’s shining star, a symbol of their efforts to break into the mainstream consumer market. It was supposed to catapult the bank beyond its comfort zone of catering to large corporations and wealthy clients. Alongside the credit card, Goldman even introduced a high-yield savings account just last year, aiming to solidify its standing as a player in consumer banking.
Sounds like a pretty solid plan, right? Well, not quite.
Despite early enthusiasm, Goldman quickly realized that venturing into the consumer banking realm was not a walk in the park. Late last year, the bank started backpedaling on its lofty goals, hemorrhaging billions in its attempt to scale up its operations. In a desperate bid to salvage what they could, Goldman quickly offloaded or made plans to sell other consumer lending businesses, like personal loans and home improvement financing through GreenSky.
To say that Apple’s decision to split from Goldman represents a setback would be an understatement. For a company grappling with a decline in iPhone sales, the services segment has become a vital lifeline. Though the Goldman card may have represented a small portion of Apple’s services revenue, it was a crucial part of the company’s broader push into financial products.
So, what now? Where does Apple go from here?
Rumors are swirling that Apple has already approached American Express about potentially taking over the card program. However, it seems Amex has reservations about loss rates and other aspects of the product. Another contender eyeing the portfolio is Synchrony Financial, the largest store credit card issuer in the U.S. Looks like Apple isn’t short on suitors.
But why did things go south between Apple and Goldman in the first place?
Back in 2019, the partnership got off on the wrong foot. Apple ran ads proudly proclaiming that the card was “not from a bank,” with a focus on expanding credit access. While this may have helped Apple’s image, it led to higher losses for Goldman. As if that wasn’t enough, Apple also insisted on sending statements to all cardholders simultaneously at the start of every month, causing a tidal wave of customer service requests that Goldman simply couldn’t handle.
Privately, some Goldman executives place the blame squarely on Apple’s shoulders. They believe that Apple’s demands attracted unwanted attention and regulatory scrutiny from agencies like the Consumer Financial Protection Bureau and the Federal Reserve. Now, Goldman is redirecting its resources, shifting employees from the dwindling consumer business to tackle the thorny issue of regulatory compliance.
With Apple’s departure looming, Goldman faces another hurdle: how to keep credit card staff motivated as they navigate this uncertain period. Severance packages and employee transfers are undoubtedly on the horizon. But as the dust settles, Goldman will have to reevaluate its failed consumer banking venture and dust off its strengths in serving corporations, investors, and the wealthy. It’s back to basics for Wall Street’s most powerful firm.
Featured image: By 2211473abhijithsaravanan, CC BY-SA 4.0, via Wikimedia Commons
Did you find this partnership fallout as shocking as we did? Let us know your thoughts! What do you think this change means for Apple and Goldman Sachs? Share your opinions in the comments below.
