Apple Raises Customer Experience Bar in US

Apple`s Fintech innovation potential is elsewhere.

Apple offered two consecutive exciting Fintech moments out of the US this Spring. The launch of Apple Pay Later in late March and now the Apple Savings Account.

Clearly, this new offering is yet another Customer Experience improvement for US Apple Card holders. Even though the penetration of the Apple card launched in 2019 is not impressive, [1] the Customer Experience effect of the Savings account linked to the card is sizable in my opinion.

Apple`s new savings account sets the Customer Experience standards higher.

The higher the expectations from customers, the lower the perceived value of the rewards that a product or service provider offers.

Customers drift away, try new things, seek new experiences.

Apple Savings account is a way to grow the Daily Cash rewards from the Apple Credit card (ranging 2%-3%). The offering emphasizes the high interest rate and the no-fees, no restrictions aspect (unlike most savings accounts).

It includes:

• A 4.15% interest rate with daily compounding.
• No fees, no minimum deposits, and no minimum balance
• Seamless UX/UI and takes <1 minute to set up for Apple cardholders
• Ability to add additional funds to the savings account through a linked bank account or from the Apple Cash balance
• FDIC for a max balance of $250,000 (via Goldman Sachs Bank USA which also administers the Apple Credit Card)

I am impressed with the elegant way it fits in the Apple Fintech consumer ecosystem. Particularly, as I reflect on how long it took Paypal — more than a decade — to integrate with Venmo.

At the same time, let’s keep in mind that in January 2023, Bloomberg reported that Goldman Sachs suffered $1 billion in losses because of the Apple card. The Apple Savings account is paying 25bps more than the Marcus savings account and of course, the 1st footnote of the Apple offering states ` Annual Percentage Yield (APY) is 4.15 percent as of 4/14/2023. APY may change at any time.`

On the other hand, the Apple Savings account offering is completely unrelated to Apple`s Big Hairy Audacious (BHA) vision to own the payments supply chain, and reduce dependencies on third parties, like card network providers.

It is not aligned with the `Breakout plan` strategy[2], which is focused on breaking away from card networks, shifting towards customized subscription bundles (hardware & software) with agility, and integrating with local payment infrastructures.

For me the more important Apple announcement this past week is the opening of the first physical Apple branches in India by Tim Cook. India is the main solution to shift Apple`s supply chain & logistics operations. Apple has increased its iphone production[3] out of India which now accounts for 7% (of total iphone production) up from 1% just 2yrs ago. Apple announced that their goal is to reach 25% of production out of India. This strategic investment in the country, may help Apple in its `Breakout` plan type of ambitions.

The Big Fintech deal would be Apple Pay`s integration with India`s UPI. Apple`s broader commitment to India, makes this more probable.

Currently, Apple e-commerce in India accepts UPI payments but Apple Pay has no presence in India. Once such an integration is established, then I foresee that Apple will offer a variety of hardware and software subscription bundles for the Indian market. This would be a genuine Breakout.

Watch Apple`s Fintech moves in India. Up to now, the only Fintech partnership has been with the Indian BNPL, ZestMoney back in 2020.

The interesting business model innovations will be happening at the Infrastructure level.

[1] In March 2020, c.3.1M Americans held the Apple Card. In early 2022, the number had grown to 6.7M cardholders as of early 2022 (Ron Shevlin, Forbes).[4] Six in ten Apple Card users use it as their primary credit card (Ron Shevlin, Forbes).

[2] What angered Apple which led to the “Breakout”? (Medium blog by Efi Pylarinou) & Should Bankers Fear Apple’s Future Growth Strategy? (Banking Transformed podcast with Jim Marous & Efi Pylarinou)

[3] Apple Takes a Bite Out of India: The world’s biggest company is hedging its dependence on China

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