While Apple Inc.'s new credit card is not expected to be a game-changer for the financial services industry, it could help Apple retain iPhone users and drive demand for the company's other products, analysts said.
Apple Card offers users cash back on purchases |
Apple on Aug. 20 launched its highly anticipated Apple Card to all customers in the U.S. The card, which is backed by Goldman Sachs Group Inc. and Mastercard Inc., charges no fees and offers a percentage of cash back on purchases made directly with Apple.
Early reviews of the Apple Card are largely positive, noting the card's smooth integration with Apple's other apps and its strong focus on privacy. Still, it could take years for the card to become a material business driver for Apple, Nomura Instinet analyst Bill Carcache said in a research note.
"We consider the card best viewed in a less linear fashion as another building block in Apple's growing financial suite," Carcache wrote.
Apple Card provides a detailed account of users' spending habits but it does not keep track of where a customer shopped, what they purchased or how much they paid.
"It's [Apple Card] about strengthening the need for consumers to have an iPhone and sort of create this ecosystem around [Apple's] own products," said Ron Shevlin, director of research at Cornerstone Advisors. As the smartphone market matures and consumers hold onto their phones longer, Apple's iPhone sales have declined. IPhone unit sales revenue decreased to $26 billion in the quarter ended June 29, from $29.47 billion a year earlier.
Apple's ultimate goal is to diversify its revenue stream and grow its user base, said Avi Greengart, founder and lead analyst at market research and advisory firm Techsponential. "This is part of [Apple's] overall services strategy, and it's an ecosystem lock-in play," Greengart said in an interview.
The Apple Card offers cashback rewards on 3% of purchases made directly with Apple using the card in Apple Pay, 2% on all other purchases made using Apple Card on Apple Pay, and 1% for all other purchases. Apple has extended the 3% cashback offer to third-party merchants too, starting with Uber Technologies Inc. and Uber Eats. The company said it will add more popular merchants and apps in the coming months.

