The Apple Card: Product-Market Unfit?

The day has finally come: one of the tech giants is *officially* dabbling in consumer-facing Financial Services.

I’m very surprised it took this long, and the tech nerd / ex-credit-card-analyst combo in me is way too excited to over-analyze this launch as two of my worlds collide.

During the big announcement at Monday’s event, Tim Cook said that this would be “the most significant change in the credit card experience in 50 years”.

A bold declaration, to say the least. Let’s dive in and assess.

The good: It’s a pretty impressive no-fee card

As someone who’s looked at the payments space for years, I will give Apple credit (pun definitely intended) for the upfront value prop on this card being pretty solid.

The potential to earn 2% across the board – with no fees – isn’t unprecedented, but it’s definitely strong.

Combine that with:

• A very sleek UI – on an app which, by the way, you already have and can’t uninstall!
• A theoretically instant approval process
• Daily cash rewards you can redeem super easily
• And – in true Apple fashion – a sexy titanium numberless card…

…what’s not to love?!

The bad: But who on earth is it for…?

In looking at the card’s features, combined with an overlay of who iPhone users are, I think this product poses significant product-market fit risk: it really has no idea who it’s for.

In some ways, it’s being marketed just like a premium card for high earners (think an AmEx Platinum or a Chase Sapphire Reserve):

• A very exclusive-looking physical card
• Design sleekness in every aspect
• No foreign exchange fees, a perk common in higher-end cards

But in other ways, Apple is explicitly touting features that typically exist in more basic cards offered to the lower end, who may not have such great credit:

• No Annual Fee
• Low interest rates (“Apple Card’s goal is to provide interest rates that are among the lowest in the industry”)
• No penalty re-pricing if you miss a payment

This mismatch is confusing. You’d expect Apple, as a luxury brand, to over-index on the former: to create an aspirational, game-changing premium card (with the requisite fees and high interest rates) only attainable – at least initially – to the higher end of the market, which would make sense, because that’s who typically own iPhones.

The titanium physical card you get with the Apple Card is indeed portrayed in Apple’s typical “you-need-to-have-me-to-be-cool” aura (see: unnecessary slow-mo rotating entrance at 2:10 in the demo video), but the mentality around the physical card itself is super confusing: you actually earn *less* when you pull out the beautiful thing, since purchases made on the card itself – rather than on the iPhone – earn a measly 1%.

Yep, it’s hot, but it lacks substance.

Any redeeming factors?

The low interest rate and lack-of-fees effort on Apple’s behalf is certainly commendable, and we need to see more of this from companies serving the market segment that uses credit cards as a borrowing vehicle rather than a rewards machine.

But, as I said above, I’m not convinced that value prop is actually super relevant for most iPhone users.

On the features front, I did find a couple of the product design elements pretty cool:

• The interest calculator offers a level of ease and potentially-margin-dilutive transparency to consumers that most banks haven’t touched with a ten foot pole

• Also, this one’s super basic, but I love the simplicity of month-end due dates for everyone!

But, at the same time, other features are either poorly done or just very table stakes for 2019:

• Text support. Every bank has a chatbot. And, the bot in their *one* sample question provided a very unimpressive bot-like non-action-oriented answer:

• The maps integration isn’t anything new. Nor is simple cash-like rewards redemption. (Disclaimer: as a former Capital One employee, I default to them in my examples!)
• Spend breakdowns have been around for awhile too (hello, Mint?), and in the demo Apple has botched whatever they’re trying to portray here – a rare design faux-pas! – with the super blurry stacked category bars below that make no sense (did I blow 25% of my Thursday spending on entertainment, or 75%?!)

So, overall, I disagree with the assertion made at the event that they’ve “completely rethought credit cards” – yes, they’ve combined some neat elements and added one or two new things, but this card offers nothing ground-breaking.

So where will this card go?

Given that Apple hasn’t done anything game-changing relative to banks, and the target market is both unclear and not within their typical reach, I’m not bullish on the card’s future.

I still think there’s ample room for innovation in this space, but I don’t think the Apple Card is going to be the next big thing in FinTech.

The sad part is that I think Apple really could have had a shot at it. If they’d stayed true to their brand and pushed the envelope to produce something truly different and aspirational, like they’ve historically been good at, they could have given us at least the next Chase Sapphire Reserve, or better.

Instead, by trying to entice people with the unintuitive combination of competitive borrowing rates and a titanium low-earning card, they’ve created a hot mess of product-market confusion soup.

Unless less they can really improve the sheer user experience by a 10x order of magnitude relative to cards that are already out there, which I don’t believe based on what I’ve seen so far, I expect this product to be a flop.

As always, I would be happy to be proven wrong!