Mega brand Apple has a consumer credit co-brand with Barclaycard. However, the anticipated Goldman Sachs competitor likely will win both the bank and tech giant a better following.
By Kelly Shermach
A co-brand with Apple will give Goldman a significant leg up as it makes its inaugural push into consumer products. And whether Goldman positions the card for mainstream consumers or targets the affluent, it probably will cannibalize the Apple Rewards portfolio.
Sour grapes for Apple Rewards
"The Barclaycard never made a big splash," says Kevin Morrison, senior analyst at Aité Group. Its variable rewards depending on purchase categories and special financing only on some Apple purchases may confuse consumers, he says.
Promotional interest abatement shuts down revenue opportunity for Barclaycard, too, converting revolving balances to closed transactions. Barclaycard has to manage separate balances on its statements.
What's going to attract customers?
"Consumers look at, 'How much value can I derive from my day-to-day spending?'" Morrison says. Then they typically consolidate their spend on a single payment device.
Cash back remains a popular reward: an easy calculation for consumers and banks. But the introductory offer and long-term rewards on the Apple Pay co-brand will have to compete with the Amazon Prime Rewards Signature Visa from Chase and its 5% cash back on all Amazon.com and Whole Foods purchases. Amazon covers a lot of product categories and fulfills subscriptions to lifestyle staples, so even with a $100 annual fee, its Prime Rewards card "is going gangbusters," says Morrison.
"Consumers look at, 'How much value can I derive from my day-to-day spending?'"
Igniting instant provisioning
Large financial institutions are moving toward instant provisioning or linking a virtual credit card to a pay application such as Apple Pay or Samsung Pay. Goldman seems prepared for this future; it acquired startup Final in January 2018, along with its digital features for credit cards.
But merchants have not prepared in kind. "Sixty-four, 65% of all merchant terminals are enabled for pay apps but don't necessarily accept them," Morrison says. This makes for an inconsistent customer experience — Apple Pay may be accepted at one merchant but not at its neighboring business.
Goldman, he says, has laid its path right but needs merchant infrastructure to catch up. When it does, the bank will reap the benefit of a strong co-brand partnership and savings on card production, fulfillment and postage.
Kelly Shermach is a Reporter at Large for The Wise Marketer.
