This week: Apple should improve its Apple Card amid its larger push into financial technology, Netflix plans to add video games to its service, details on the next iPhones, and Apple launches a MagSafe battery pack.
The Starters
In last week’s edition of Power On, I suggested that Apple consider a higher-end version of the Apple Card to tackle American Express and Chase, and this past week, we broke the news that Apple is working on a “buy now, pay later” service with Goldman Sachs for Apple Pay. The company is also eyeing a Square rival built into the iPhone to let users accept payments with a tap.
The company’s ambitions in the financial tech space are clearer and broader than ever. But Apple and Goldman have an important task before expanding: improving their existing credit card.
The Apple Card debuted in 2019 to great fanfare. Apple users, myself included, were excited about the deep iPhone integration, 3% cash back on Apple purchases (plus, later, an Apple product installment program), a free titanium card and customer service via iMessage.
But two years after launch, Apple hasn’t managed to deploy the card outside of the U.S., neither has it upped its rewards program, nor has it added some common benefits like enhanced warranty protection. Some users have complained about Goldman’s sometimes lengthy approval process, low credit limits and human-designed, but computer-based, algorithms superseding the ability for customer service agents to resolve issues.
For traditional credit card issuers, a U.S.-only card wouldn’t seem like an anomaly. But for Apple, a global technology company, a U.S. product is rare. In fact, the Apple Card is its only U.S.-only feature other than Apple News Audio. Launching financial products requires dealing with regulators and partners, but that hasn’t stopped Apple in health and media.
The rewards system is the same as on day one: a standard 1% cash back for purchases made with the physical card, an enticing 2% return for Apple Pay transactions and a reasonable 3% back for Apple purchases. Apple has expanded that 3% back to additional retailers, including Uber and Walgreens, but the total number of partners is still fewer than 10.
Some of the primary issues some prospective and current users have faced are likely due to Apple and Goldman’s focus on algorithms for application and credit limit decisions. That is exacerbated by the limited ability for Goldman support agents to intervene in and modify decisions.
For instance, some Apple Card users have seen their applications rejected because of incorrect or outdated information on credit reports, something as simple as an actual (or misreported) missed payment a couple of years ago, or for having too many, but a not specified number of, credit cards, loans or mortgages.
When reviewing applications, Goldman uses the FICO Score 9 system, a lender standard that takes into account more factors than the normal credit check. That means Goldman is making decisions based on credit scores that are often lower than what is typically reported by apps like Credit Karma, WalletHub or TransUnion. It’s also often a different score than the one used by banks for giving loans. This has caused confusion for people who have seen their applications denied.
Some users with credit scores in the high 700s or 800s have also reported rejections despite approvals from the likes of American Express and Chase. Those are sometimes due to high, but explainable, debt obligations — despite no history of missed payments.
In contrast, some other credit-card firms have humans with more latitude to change decisions made by algorithms after receiving explanations, corrections and evidence from customers. For its part, Apple has a Path to Apple Card program designed to help declined users get a card. Goldman agents are also supposed to help guide consumers with sending changes to the credit reporting agencies.
Credit limits are likewise impacted. Some users have reported Apple Card credit limits as low as $250, which isn’t enough to buy the AirPods Pro with tax, let alone an iPhone. Other users have seen credit limits between $1000 and $5000, perhaps as little as a tenth of the credit limits they’ve been granted elsewhere. For context, the average American’s total credit limit across their cards is over $30,000, according to Experian.
Having recently entered the consumer space, Goldman is risk averse. But sometimes the low credit limits are actually the result of bad information from credit reports and decisions made by algorithms that can’t be easily changed by humans. The low credit limits also mean that users may quickly fill up their credit utilization ratio, potentially hurting their credit scores if they don’t immediately pay down balances.
Some users have reported unexpected credit limit increases in recent months (Apple also recently launched Apple Card Family, allowing family members to combine credit lines), but some users are still reporting an inability to increase their spending limit — even after showing an ability to pay off their balance in prior months.
Expectations are high for Apple and Goldman, two giants who partnered to shake up a legacy industry. For its part, Apple maintains that the card’s launch is the most successful to date. They’ve dropped many fees, improved interest rates, and built a slick user interface, but there’s still a lot of work to be done to make the Apple Card the best option for most people.
The Bench
Will Netflix’s gaming push be Apple’s next App Store fight? In the U.S., tens of millions of consumers use iPhones and iPads to stream Netflix. That might complicate Netflix’s plan to launch games on its service in the next year. See, while Apple’s App Store allow apps that include catalogs of music, video, or books, Apple has taken a hard stance against gaming apps and has banned many such services — even from big players like Microsoft and Nvidia. Will Netflix be next to go to war with Apple over App Store rules? Unless Apple changes its stance next year, the answer is likely yes.
Apple prepares for a giant iPhone fall: The next iPhones are only about two months away and the company is expecting to make a big splash as economies reopen. Apple has tasked suppliers with building up to 90 million new iPhones for this fall. That’s a 20% increase over the 75 million units Apple planned for the iPhone 12 in 2020 — despite only readying mostly minor changes. Expect a a faster A15 chip, smaller notch, a new display for better battery life and the potential of an Apple Watch-like always on mode and a 120Hz refresh rate and upgrades to video recording.
Be careful with Apple Pay Later: Apple will take the “buy now, pay later” phenomenon mainstream by building it into Apple Pay and every iPhone. That can be very dangerous. I can imagine some users buying things that they can’t necessarily afford, racking up interest with monthly installments. That’s no different than the age-old problem with credit cards, so the real beneficiaries here will be Apple, Goldman Sachs and merchants rather than the consumer. But that’s the financial products industry, right?
$99 for a small iPhone battery? Apple says ‘you betcha!’: Apple fans like me have been waiting for this: an external iPhone battery from Apple that sticks to the back of the phone via MagSafe. It was supposed to launch earlier this year, but better late than never I guess. I’m not surprised at the $99 price (it’s shiny and made by Apple, remember?), double the price of comparable accessories, but the apparent battery capacity (which 9to5Mac is estimating can result in only a 50% charge for the 12 Pro Max) is disappointing. I’ve got one on the way and will share my experience next week.
The Schedule
Next up on the Apple calendar: third-quarter earnings on July 27th. Apple has told investors it has expected a negative revenue hit of $3 billion to $4 billion during the quarter. Stay tuned for coverage of that. Looking further out, I’d expect an Apple event in September to introduce the latest iPhones. Also coming this fall: a revamped iPad mini, thinner ninth-generation iPad geared toward students, the new MacBook Pros and upgraded Apple Watches. It’s going to be another packed fall.
Post-Game Q&A
Q:Do you see the decentralization of work happening at more companies? Do you think company HQs will become a thing of the past?
Q: Do you know when the new MacBook Pros will be available, and for a home user, is there a need for one or should I just go with a MacBook Air?
