Apple redesigns credit cards, but can it change our relationship with debt?
Apple recently unveiled a flurry of new products which includes its new credit card system. The card, developed in partnership with Goldman Sachs and Mastercard, will enable payments without the need for CC numbers, CCV codes and signatures.
To use the card, all you need is an iOS-enabled device and a point-of-sale terminal which uses ApplePay. This entry marks a continuation of the company’s expansion into new services.
Apple is diversifying to better serve its users
Apple is known as a hardware company first and foremost; this strategy has helped it become a trillion dollar company. The first example of this was the iPod which skilfully mixed a seemingly great value proposition ($0.99 songs) with beautiful but unremarkable hardware. An iPod’s performance is no better than that of a Zune, but we know who ultimately won the battle. Over time, Tim Cook’s behemoth expanded into services to diversify away from its main revenue resource. Given the recent iPhone slump, it looks as though the company will need to continue in that direction. Beyond diversification, Apple knows that its user base is incredibly sticky, and often affluent. We’ve seen the Airpod memes, but there’s a layer of truth to them. Scott Galloway explains it brilliantly here too: Apple is a status and sex symbol rather than an electronics company.
More ways to spend, but what about savings?
In typical Apple fashion, the new credit card is meant to help you simplify spending and improve your savings. Through an intuitive wallet app and clean design, the tech giant wants you to get the benefits of a bank with the simplicity of a fintech outfit. As always, Apple wants to be the tech giant that looks out for you; the keynote message was no different. However, if we look under the hood, Apple might be enticing quite the opposite. For a start, the system provides immediate cash-back on purchases: the different gamification rewards will likely induce dopamine hits as you shop. The constant feedback loop and Apple’s line of credit might instead make users more likely to purchase even more via its devices. Even if the design is meant to help you view and understand your spending, most likely it’ll help dig a deeper debt hole.
Joining the dance
The move is ultimately not surprising. The new initiative is a way of tackling advances from competitors like Amazon. For comparison, nearly half(!) of US households are Amazon Prime subscribers. By opening up a payment gateway, Apple facilitates the first piece of the value chain: ensuring people have a way of purchasing goods at all times. Firms like Amazon have already figured this out, oftentimes mimicking rivals from across the pond in China. Companies like Amazon also extend preferable lines of credit to top sellers, so long as the goods end up back on the platform, creating a positive cycle of purchasing and rent-seeking in the process. Perhaps we shouldn’t be surprised that Apple’s seeming good-will into payments may ultimately create more debt problems in the long term.
Can Apple improve our debt?
Debt is primarily a by-product of incentives and behaviors. Historically, very few companies have successfully changed human behavior patterns. Why would Apple do that? From a business-model standpoint, Apple might maximize profits from interest rates and other potential fees (the card has no annual fees or late payment fees, for now). More broadly, there are no reasons for users to change their behavior. If Apple instead chooses to provide better incentives around savings, then perhaps it can make good on its goals. More importantly, having such a vision will help it gain a greater foothold with consumers, further solidifying its niche.