Apple Card Savings Hits $10 Billion in Deposits
Today, Apple announced that Apple Card’s high-yield Savings account offered by Goldman Sachs has reached over $10 billion in deposits from users since launching in April. Savings enables Apple Card users to grow their Daily Cash rewards with a Savings account from Goldman Sachs, which offers a high-yield APY of 4.15 percent.
$10 billion feels like a lot of money to have deposited in less than four months (see “New Apple Card Savings Account Offers 4.15% Interest,” 17 April 2023). Apple has never revealed the number of Apple Card accounts, although one banking consultant estimates between 6 and 12 million.
But it seems likely Apple is revealing this information now due to problems with Goldman Sachs, the bank behind the Apple Card and associated Savings account. Goldman Sachs has reported significant losses, attributing most of them to the Apple Card, which doesn’t generate revenues from annual fees, late fees, or foreign transaction fees. Goldman Sachs reportedly wants to sell the Apple Card business to American Express but is locked to the Mastercard network until at least 2026. American Express’s payment network has somewhat fewer acceptance locations.
We haven’t signed up for Apple’s Savings account because the only way to integrate it into financial tracking systems is by exporting and then importing a file every month, something we put up with only grudgingly for the Apple Card. Apple’s financial services may be simple to use in the Wallet app for an individual, but until Savings integrates directly—not just through downloadable exports—with personal finance systems, high-yield savings accounts from other banks are more attractive.
Some back-of-the-envelope calculations:
If we assume each Apple Card Savings customer is at the FDIC insurance limit of $250k (unlikely), a conservative estimate of account holders is 40,000 ($10b/$250k).
So if the estimate of 6-12 million Apple Card holders is accurate, between 0.7% and 0.3% of Apple Card holders are using Apple Card Savings. Again, this is a very conservative number.
Marcus holds about $490 billion in assets. Apple Card Savings, then, represents 2% of Marcus’ assets. (source: BankFind Suite )
American Express had about 133 million issued credit cards in 2022. So acquiring 6-12 million Apple Card accounts probably wouldn’t have a huge effect on AMEX’s business, depending on how much revenue Apple Card holders generate for the card issuer. Further, recent media coverage of Marcus Bank and of Apple Card has said that Apple Card is unprofitable for Marcus.
One factor that argues against AMEX taking over Marcus or Apple Card is that AMEX does not have a huge investment banking business that would benefit from a close relationship with Apple by generating fees and deal-flow to offset Apple Card losses.
(AMEX issued card data source: American Express Company 2022 Annual Report and American Express Company 2022 Annual Report )
Gruber links to a paywalled article in The Information that claims 10 million Apple Card users.
I get that integration with financial software is convenient, sure - though that would seem to (as one would expect) entail additional risk. especially with how integration is done in some systems (how can anyone share their credentials with a third party - to a financial account?!).
so, knowing that security is certainly a concern for you, Adam, can you speak to how you balance these concerns? and perhaps specific integrations you’ve found usefully secure?
thx
I’d say that every other bank provides integration with financial software, but I’m sure there are exceptions. Much of the integration happens via Plaid and Yodlee, and I’m unaware of any particular security issues, although of course your attack surface is a bit larger for using it.
Financial account integration just doesn’t seem like one of those problematic areas.
I just cancelled my Apple Card because, due to a decrease in my fixed income, I felt I had too much available credit vs income. The Apple Card was the LEAST used card I had as well as being the NEWEST card. I never carry a balance on any of the cards so I felt closing it would have the smallest impact on my credit rating.
As for savings accounts, I have a share account at a credit union where my IRA is located and a regular bank savings account. I’ve dealt with both those institutions for around 50 years, so it would have been too cumbersome to switch.
Oh, I prefer MasterCard over VISA, but if I hadn’t cancelled the Apple Card, I DEFINITELY would have if it was switched to American Depress!
mmm; last I checked (jan '23) Yodlee not only required me to provide them the login credentials to my financial account (wow!), but also had an onerous account agreement.
maybe I’m over-reacting? maybe it’s not as onerous as it seemed?
what confidence can I have that:
the credentials supplied, are used securely and not persisted?
once a link is created, it’s not abused - whether by either side, yodlee itself, or leakage of this critical financial access info?
all genuine questions - I’m certain you’ve considered this carefully, Adam – and I’m curious how you’ve become confident that it’s worth the risks; thx.
The simple answer is that millions of people and companies use services like Yodlee to connect bank accounts with financial software. If there were significant security lapses resulting in financial losses, they would be huge news.
There’s no way any individual can make an informed decision about the security of any given service. They’ll all say the right things, and no one outside the company can have any real knowledge of how good the security actually is (partly because the information isn’t public but even more so because so few people have the necessary expertise). So all we really have to go on is a calculation based on how heavily the service is used and what breaches have become public. And you basically have to have some trust in the system. If you don’t, I recommend gold under the mattress.
Of course, the most important thing is that your login password for your bank is seriously strong and unique. That way, even if the worst happens and encrypted passwords are stolen, it’s much less likely that yours could be decrypted.
It’s also difficult to assess a bank’s or a credit union’s privacy and security from the outside because it has become so common to white-label outsource core functions, such as account dashboards, online bill pay, and reward programs, to companies like Fiserv, Zelle, Plaid, and Yodlee. Further, many back office activities are dominated by a small number of providers. This means an attack on a single company (a recent example is the MOVEit hack) can cascade into a massive breach.
got it, thx - although there’s a gulf of more secure choices, between those extremes of blindly following the crowd, and gold under the mattress.
Is there really that much of a gulf, though? The financial system is vastly complex, and no normal person has any chance of knowing whether they’ve put their money with a bank that has good security, works with reliable partners, and is properly capitalized. So once you get past gold under the mattress, I’d argue that what millions of people do in the traditional financial system, including all these fintech services firms, is probably pretty safe. Even when there are high-profile problems, like Silicon Valley Bank, the depositors don’t generally suffer losses.
Particularly as opposed to anything in the crypto space, which is little more than a movable Ponzi feast.
@ace Are you using the Apple Card on a regular basis despite the lack of financial software integration other than monthly OFX downloads?
Re Yodlee – even if security isn’t a concern, I think privacy is.
We use it some, but not a huge amount.
Could be, though I’ve never noticed being marketed to by anything I could associate with Yodlee, as opposed to many other Internet companies. I just can’t get exercised about this in comparison to the privacy sausage factories of social media companies, many publications, and lots of apps.
Wall Street Journal is reporting that Apple is leaving the partnership with Goldman Sachs.
Apple News link (I think it’s not a News+ link; the original WSJ story is.) Apple to end credit card partnership with Goldman Sachs - WSJ
The link here was to the Apple News version of a Reuters article citing the WSJ.
Direct link to the Reuters article
Direct link to the WSJ article (for those with subscriptions)
Link to Apple News+ version of the WSJ article
This is one of those things that sounds like big news, but my bet is that everyday users of the Apple Card and Apple Savings won’t notice at all. And Apple will work really hard to make sure that’s the case.
This sort of thing happens all the time. Co-branded credit cards change the underwriting bank plenty of times. Some examples:
When these things happen, existing card holders are automatically transferred to the new card and new cards are mailed out. There is a period of overlap so you can continue using the old card up until you activate the new one (unless, I suppose, you wait a very long time).
As I understand it, the Apple card is virtual. So Apple can probably just push a new account number into your phone when the transition happens. If the physical card is also tied to a virtual number, then they should be able to transition its back-end as well. If they physical card will need to be replaced, then they’ll send out new cards in much the same way that other co-branded cards do during these transitions.
Things to watch out for:
If Apple can just find somebody to take over (and I have no doubt they’re working hard on that) that’s likely the case.
I guess some concern is perhaps warranted because Apple has so far had very consumer-friendly requirements in place and encouraged good credit behavior over profits for the bank. That could lead (among other possible outcomes, of course) to Apple either having trouble finding a bank willing to take over under these same conditions (press alluded to that) or else, previously consumer-friendly conditions watered down to improve yield for the bank in an attempt at securing a new partner.
I don’t think most people care much who the bank behind Apple Card is. But I would expect Apple Card users do care about retaining the good conditions they’ve been enjoying.
Apple has been moving forward in negotiations with other parties. And for some time now it has been rumored they’ve been considering taking the whole banking shebang in house:
Bloomberg reported that Apple is launching an initiative code-named “Breakout” to bring more financial services capabilities—like payment processing, risk and fraud analysis, credit checks, and customer service—in-house
And Apple already has had lots of experience with Apple Cash and Wallet. And Goldman turned out to not be anything resembling a match made in heaven. Here’s one example:
Although Apple was not guilty, they were the victim of bad press for a while.
https://www.bloomberg.com/news/articles/2021-03-23/goldman-didn-t-discriminate-with-apple-card-n-y-regulator-says#xj4y7vzkg
I’d just add that those services are regulated differently–and perhaps most importantly, given Apple’s secretive and extremely opaque corporate culture, regulated a lot more lightly–than banking.
My personal view is that it is unlikely Apple would ever buy or build its own bank because of the strict and intrusive regulatory requirements and the amounts of capital that would be tied up by reserve requirements and by operating the bank.