What you need to know
- Analysts at Nomura penned a report on Apple Card's profitability on Wednesday.
- The report calculates that Goldman Sachs is paying around $350 currently to acquire a new user of Apple Card.
- They predict that Apple and Goldman Sachs may eventually release a debit card next.
Apple Card is costing Goldman Sachs more than anyone else right now, according to analysts at Nomura, a financial services group based out of Japan. Reported on by CNBC, the group is predicting a potentially volatile path for the bank behind Apple's first credit card. According to Nomura each new Apple Card user is costing Goldman around $350, which they estimate will take four years for the bank to recuperate those costs and start becoming profitable.
This concern is based on a few things. The first is that the financial industry has always been hesitant on the profitability of Apple Card, especially since it is breaking from the normal sources of revenue. Apple Card has virtually no fees: no annual fee, no late fees, no international fees, and no over-the-limit fees, all of which are normal ways the rest of the credit card industry make money. Citigroup reportedly ended a potential partnership with Apple Card over fears of profitability.
Another concern is just how many customers who are being approved for Apple Card. In order to increase adoption and make the credit card available to as many people as possible, Goldman Sachs is reportedly approving a wide range of applications, including some that have relatively low credit scores. This always creates more risk for a bank, and something that the analysts point out could prove damaging, especially if the economy takes a downturn in the near future.
Goldman Sachs, however, has said that it is looking at Apple Card as a long-term investment, and not something that the bank intends to make a quick buck off of. Nomura seems to believe them as well, predicting that the bank and Apple may expand their partnership and eventually release a debit card together as well.