What happens when everyone's favorite company, Apple, goes into business with everyone's least favorite bank, Goldman Sachs? Exactly what you'd think: profits at any cost.
The iPhone maker is venturing into the credit card business by partnering with Goldman Sachs and MasterCard. Apple is offering a cash-back credit card comparable to many other cards currently on the market. Not quite the level of innovation from the Steve Jobs era.
With profits and revenues down, Goldman Sachs is looking for new ways of “doing God’s work.” By approving subprime borrowers for the Apple Card, it's doing exactly that by offering products to people who don’t vacation in The Hamptons.
In Goldman's defense, it was Apple who preferred a partner that would approve as many of its 100 million-plus U.S. iPhone users as possible. Apple unsuccessfully tried this in the 90's, when Steve Jobs “had an aversion” to rejecting the company's customers. Other banks were hesitant to partner with Apple. An employee at a competitor of Goldman Sachs texted his buddy “Dude, if that portfolio ever makes money, I’m buying you a beer.” Citigroup pulled out over fears it couldn’t make an acceptable rate of return.
So what happens if you lose your Apple device? Well, you can’t pay your bill because there isn’t a web option to pay, unlike literally every other card provider. Payments can only be made through the Apple Wallet app. Of course, you can call and make a payment, but if you just lost your phone and are a subprime borrower, you likely won’t be able to afford a replacement. So for a company that was once named the most innovative company in the world for 10 consecutive years, Apple’s recent innovations include a credit card that can’t be paid online and removing the headphone jack.
It will be interesting to see if in a few years "The Big Short 2" is released, in which Goldman Sachs makes a killing on credit-default swaps on the creditworthiness of the borrowers who are more or less being forced into Apple’s credit card. After all, the “dude” at Goldman Sachs has to find some way to make money so he can get that beer.