Apple Card And The FinTech, TechFin Conundrum

So far, the young life of the Apple Card has turned out pretty — perhaps even spectacularly — good, depending on the source. However, the real tests are yet to come, as is the case for anything new and popular.

The recent news about Apple Card includes a big thumbs-up from Goldman Sachs CEO David Solomon. The investment bank is hardly an unbiased observer when it comes to Apple Card — Goldman is the bank behind the payment method, after all. However, when Solomon touts its August debut as “the most successful credit card launch ever,” it’s hard not to notice and take that statement with a fair amount of credibility.

Apple, too, is saying nothing but nice things about Apple Card, which “is designed to work with any other credit or debit card stored in the Wallet app for use with ‌Apple Pay‌. You can set it as the default card, and use it for in-store purchases on iPhone and online purchases on Apple Watch, iPhone, iPad and Mac.”

“We just have their word on it, but I am assuming it to be true,” said Vaduvur Bharghavan, president and CEO of Ondot Systems, a card services provider. Bharghavan has an intimate view into all things digital and mobile when it comes to cards. On Wednesday (Oct. 23), he shared his early thoughts about Apple Card with Karen Webster from PYMNTS. The wide-ranging discussion concerned nothing less than the future of card payments — and even FinTech — in a world that now includes Apple Card.

Wow Factor

Things are still early (the Apple Card launched in August), and that means the “wow” factor still feels fresh, he told Webster. For instance, the card changes colors, depending on the transaction and type of purchase. “It’s amazing how many people have talked about the fact that there is a color change,” Bharghavan said. Indeed, that is one of the features that, in his words, have excited and animated Apple Card uses so far.

Another point of positivity is the ease with which consumers can get the card. As Bharghavan told it, it can feel almost too easy (as in, not as laborious as people expect from credit card applications and issuance), and is relatively seamless and frictionless work to get a replacement or new card from one’s existing financial institution (FI) — at least, in a general sense, as not all experiences are alike, of course.

Other factors working in favor of the Apple Card and its growth potential so far include its simple activation, and what Bharghavan called the “spectacular initial experience” of Apple Card, which he predicted would become the new norm in the world of card payments. Not only that, but Apple Card holds the promise of offering even more instant rewards to cardholders, he said, and more visibility into transactions and the merchants through which those purchases are made. Clarifying details like the name of a merchant, instead of a truncated set of letters and numbers, can mean the difference between a transaction that might be disputed and one that is not.

Of course, all the points, features and positivity are subject to change, as Apple Card is still new. Everything that could happen to a cardholder has probably not happened yet. Having less friction when bad things happen — so often a source of frustration, anxiety and friction for cardholders around the world — is where the rubber meets the road for cardholders. Getting a new card reissued and provisioned if lost or stolen certainly counts as one of those bad things. So, too, is a low battery on mobile devices (limited access to the Apple Card), and consumers not being able to see a card’s numbers because Apple Card does not have them.

“When bad things happen, I have serious concerns about how [Apple Card] will work,” Bharghavan told PYMNTS.

More generally, the future of Apple Card is in the hands of two operations that — for all their other expertise and success — are both newbies in the world of consumer credit. That concern led to a broader discussion between Bharghavan and Webster about the roles that FinTech firms and legacy FIs can and will play in the coming decade. Who will provide what card and other financial services in the 2020s, and what kind of path will Apple Card blaze?

‘Fin’ Versus ‘Tech’

“It’s easier for a bank working with legacy [systems and practices] to create a better digital interface than it is for Apple to learn all the complex inter-workings of [credit cards],” Bharghavan said.

Webster put it another way, and took apart the phrase “FinTech” when doing so. “‘Fin’ can add ‘tech’ easier and better than ‘tech’ can add ‘fin,’” she said.

“Absolutely,” Bharghavan responded.

Additionally unclear is if those legacy FIs realize how much of an advantage they have, given the trust they have earned from consumers when it comes to financial services, he said. That question led to a broader inquiry about what Apple is really shooting for with Apple Card — a true financial services and payment instrument, or yet another appealing way to connect to the larger Apple ecosystem? (Or, one must consider, a bit of both?)

“I think what they are betting on,” Bharghavan said, “is this being about being part of the Apple universe.” That said, Apple can have relationships with consumers, too, even via Apple Card — such relationships are not limited to FIs, of course.

The conversation took a philosophical turn toward the end when Bharghavan remarked that Apple Card has changed the conversation about the role of a “credit card” and credit card issuer in the decade to come. Is a card an enabler for commerce or for Apple? Does the Apple Card function more as a link to the Apple ecosystem? No matter what, Apple is raising the bar when it comes to the credit card and card app experience, and legacy FIs may have to stretch to reach it.