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Apple ends partnership with Goldman Sachs and expands into lending business

3 min read

Apple has decided to end its credit card partnership with Goldman Sachs as the tech giant moves deeper into the consumer lending business.

According to a Wall Street Journal report, Apple recently made an offer to Goldman Sachs in which the company stated its intention to close the contract within in the next 12 to 15 months.

The termination covers the entire consumer partnership, including the credit card launched in 2019 and the savings account launched this year.

The decision marks a rapid turnaround for a program that was extended through 2029 just over a year ago and was expected to be a cornerstone of Goldman Sachs’ push into the mainstream consumer market.

However, things took a turn for the worse for Goldman Sachs towards the end of last year as the company suffered significant losses in its attempts to build a comprehensive consumer business.

Earlier this year, Goldman Sachs informed Apple of its intention to exit the partnership.

As a rule, the retailer, in this case Apple, has a control function in such collaborations.

Goldman Sachs has been in discussions with American Express about the possibility of transferring the program to the renowned card giant.

However, American Express has expressed concerns about certain aspects of the program, including loss rates, and it remains uncertain whether these discussions have progressed further.

Synchrony Financial shows interest in Apple’s credit card program

Synchrony Financial, the largest issuer of credit cards in the United States, has also shown interest in taking control of the credit card program. Synchrony has long sought to position itself as an issuer with deep ties to tech companies, boasting partnerships with industry giants like Amazon and PayPal. Interestingly, Synchrony originally competed with Goldman Sachs for the Apple credit card program. For Apple, this development represents a setback for its services business, which is becoming increasingly important given the stagnating iPhone sales figures. However, it’s worth noting that the Goldman partnership likely represents only a small portion of Apple’s revenue. In the September quarter, Apple reported a negligible annual decline in total revenue, while services revenue rose about 16%. For Goldman Sachs, the end of the partnership represents a significant step backwards in its failed attempt to diversify beyond serving corporate clients and the super-rich. The bank is now concentrating again on its core clientele.

Apple’s relationship with Goldman Sachs faced challenges from the start

The relationship between Goldman Sachs and Apple was problematic from the start. Apple’s advertising suggesting that the card was not issued by a bank reportedly irritated some Goldman executives. Additionally, Apple insisted on approving almost all applicants, which led to increased loan defaults at Goldman.

Apple’s requirement to send cardholders’ bills at the beginning of the month also created significant customer service issues for Goldman, as most card programs stagger billing to avoid high call volumes.

Some Goldman executives attribute the regulatory scrutiny the bank has faced to its collaboration with Apple. Last year, Goldman announced that the Consumer Financial Protection Bureau was investigating its practices in managing credit card accounts, including fixing billing errors and refunding cardholders.

The Federal Reserve has also been investigating Goldman’s broader consumer lending business. In response, Goldman launched Project Blue, an internal project to address regulatory issues, and pulled employees from its consumer lending business to support this project.

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