JPMorgan Chase Could Replace Goldman Sachs in Apple Card Partnership
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As Apple and Goldman Sachs prepare to part ways, JPMorgan Chase is reportedly in discussions to take over the Apple Card credit card program, according to a report from The Wall Street Journal.
The WSJ says discussions between Apple and JPMorgan started earlier this year and have moved forward in recent weeks. However, according to the ever-popular “people familiar with the matter, ” a deal could still be months away. There is no guarantee that a deal will happen, as several important details still need to be worked out.
It was announced last year that Apple and current card issuer Goldman Sachs would be parting ways. The deal offered credit cards and savings accounts.
Apple has since flirted with several potential suitors, meeting with Capital One and Synchrony Financial to entice them into taking over the credit card program, according to the report’s sources. Goldman Sachs also had discussions with American Express last year.
If a deal is made between Apple and JPMorgan, it would deepen the existing relationship between the banking giant and the Cupertino tech firm. JPMorgan pays Apple whenever one of its millions of credit card customers uses one of their cards via Apple Pay and also offers Chase customers deals on Apple products.
If the talks are successful, Chase will receive a healthy boost in its credit card numbers, adding to the millions of cards it has already issued. Chase will also gain access to loyal Apple customers, who will expand Chase’s card business. Apple, meanwhile, will find a new home for its popular credit card, which has a 12 million-strong user base.
Goldman Sachs and JPMorgan will need to agree on the terms and conditions of the card transfer, as is the case whenever a credit card partnership changes hands. The pair will need to agree on a transaction price for the existing card balances. Another point of negotiation will include the current consumer rewards program connected to the Apple Card.
The report’s sources say JPMorgan’s negotiation team wants to pay less than half of the approximately $17 billion in outstanding Apple Card balances. Credit card portfolios traditionally sell at the loan balance value or a premium. Accounts that are delinquent or otherwise problematic can be sold for less than the balance value. The Apple Card program carries both terms associated with it and subprime exposure that could make it costly for any new issuer.
Chase’s chief executive of the credit-card and connected commerce business, Allison Beer, has been spearheading the bank’s efforts to put a real value on the Apple credit card program over the last few months. She has been briefing senior executives at JPMorgan on the negotiations, including CEO Jamie Dimon.
Apple’s current program has subprime exposure and terms associated with it that could be costly for any issuer to take on.
Beer has been leading the bank’s efforts to put a value on the Apple program over the past few months, people familiar with the matter said. Senior executives at JPMorgan, including CEO Jamie Dimon, have been briefed on the continuing negotiations, they said.
Dimon earlier this year remarked that tech companies are increasingly becoming competitors to financial businesses like JPMorgan, meaning the bank is being forced to consider new partnerships.
“The banking system is not static,” Dimon told shareholders earlier this year. “There are startup banks, mergers, successful upstarts and fintech banks, and even Apple, which effectively acts as a bank.”
JPMorgan is also pushing to shut down some parts of the Apple Card program, pushing back on Apple’s requirement that all cardholders receive their statement at the beginning of the month, the sources said. Goldman Sachs faced customer service issues with the unusual billing structure, which caused it to face regulatory scrutiny of its consumer-lending business.
The Consumer Financial Protection Bureau has also been conducting a probe into Goldman’s credit card practices. The investigation is focused on credit card “account management practices,” according to the bank. The report says the investigation is almost entirely focused on the Apple credit card.
