Deposit from iPhone. Whether Apple will kill traditional banks

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In its history, Apple has earned a reputation as Dizraptor of different industries. This year launching several financial services this year indicates its ambition in Fintech. What plans can Apple actually have and should banks fear competition with IT corporation?

What's happened

“Apple will forever change how we all buy things,” said the head of Tim Cook in 2014 at the presentation of the Apple Pay mobile payments system. And although 8 years later we still use plastic in stores and enter these cards on sites, ambitions and Apple capabilities in the financial sector are only growing.

After Apple Pay in 2017, the company introduced the Apple Cash payment application, in 2019-Apple Card payment cards. In 2022, Apple launched a payment acceptance function using iPhone (TAP To Pay). If both the buyer and the seller use Apple devices, payments can be processed without involving banks or payment systems, such as Visa and Mastercard.

Finally, in 2023, Apple launched two potential blockbuster at once.

• The first was the service of interest-free payment by installment Pay Later, allowing consumers to break online buying into four payments within six weeks, without paying interest. The release came in handy: the increase in prices increased the popularity of BNPL services in the United States even in unexpected areas as products and small purchases, the American Forbes writes . And these are exactly those purchases for which consumers most often use Apple Pay.
• The second in mid -April, Apple launched a highly income deposit account with a percentage of 4.15% for those who have Apple Card (it is available only in the USA). This profitability is more than ten times higher than the average in the country: according to the Federal Deposit Insurance Corporation (FDIC), the average indicator is 0.37%. However, there are suggestions with a bet more than 5%, says WSJ. There is no minimum deposit or locust period, the ceiling is $ 250 thousand (the maximum amount allowed for insurance according to the rules of FDIC). Apple does not have a banking license, so the deposits themselves will be in the Goldman Sachs Bank-Partner. At the same time, the profitability of Marcus - its own savings account of the bank - is now only 3.9%.

How great Apple's ambitions are in Fintech

The launch of a high -profit savings account is needed in the first place to “tie” users to their ecosystem, the American Forbes writes. Apple has two billion people around the world, but less than 10% of them use Apple Card, the analyst of Wedbush Securities Dan Ives. High -profit accounts are obviously aimed at attracting new users.

Now the revenue in the Apple payment business is generated by a commission that issues of credit cards are paid when they are used in Apple Pay transactions (in the amount of 0.15%). According to analysts referring to WSJ, the revenue of Apple Pay over the last financial year amounted to $ 1.9 billion or approximately 0.5% of the total revenue of Apple. The company does not separate this data separately; Calculations are probably calculated on the basis of data on payments.

At the same time, according to the three former Apple employees with whom the FT spoke , the company has a long -term development plan in the financial sector, and the current steps lay the basis for capturing a larger market share. Potentially, this is another area that Apple can change if the company, for example, decides to become a bank. According to WSJ, the annual volume of consumer loans and retail purchases in the United States exceeds $ 10 trillion - this is one of the few industries that are still larger than the smartphone market.

At the same time, Apple chose a good moment for expansion: the threat of a crisis remains in the banking sector, three banks went bankrupt in March at once , and JPMorgan was purchased this week. Due to fears about the banking sector, many are already looking for an alternative to banks. According to the American Forbes, only in the first four days, Apple attracted almost $ 1 billion for 240 thousand accounts. According to the Fed, starting in March 2022, when the regulator began to increase the rates, customers of commercial banks withdrew about $ 900 billion from deposits.

Apple may try to select part of the business from the banking sector, according to APC, Executive Director of the Consulting Company, Jay Critz. “Banks are inherently reactionary - this repels consumers,” he says. According to the Gallup survey, conducted in 2022, only 27% of the Americans were “very or enough” in their banks.

What advantages over traditional banks do Apple have

• Apple can be more stable than most banks. Near the corporation, even the largest banks look small. FT notes that only one unit earning at subscriptions and purchases in the App Store in 2022 was a profit of $ 55 billion - this is the fifth of Apple income, but at the same time more than earned JPMorgan and CITI combined.

The Pay Later service works at the expense of Apple. Typically, banks use borrowed funds - for example, customer deposits that can quickly disappear, as happened with SVB. Apple can afford to operate exclusively with his money - at least with the current volume of business. As of the end of 2022, the volume of money and liquid securities of the company exceeded $ 165 billion.

• Huge client base and data on iPhone users. This information can potentially be used to assess the credit risk assessment. And a large number of customers simplify the involvement in new products: the former Apple employee told FT that the company's costs to attract Apple Card customers were "ridiculously low compared to any other company - issuer of cards."
• Apple brand force. According to the rating of Brand Finance Global 500, Apple is the most expensive brand of the world, estimated at $ 355 billion. But there are practically no banks in the top. According to Interbrand, the Apple brand is also in the first place in the world, and only JPMorgan got into the top-25 of banks.

Banks will either have to compete with Apple-which will be difficult, given the digital wallet of the IT giant, or create microservices within different types of wallets, said Chris Nichols, director of the Southstate Bank capital markets.