Analysis on Apple and Goldman Sachs’ Breakup Motivation

Analysis on Apple and Goldman Sachs' Breakup Motivation

The Apple and Goldman Sachs Partnership: A Tale of Misalignment


Rumors have been swirling recently about the possible dissolution of the financial partnership between Apple and Goldman Sachs. The Information has now shed light on the reasons behind this potential split, revealing a tale of misalignment and contrasting approaches between the two companies.

Goldman Sachs has been Apple’s partner on various financial services, such as the Apple Card, the Apple Savings account, and the beta-tested Apple Pay Later. The partnership, which began in 2019 when the Apple Card launched, has hit a roadblock, as Goldman Sachs is not generating enough revenue from these ventures. Furthermore, the bank’s customer service issues with the Apple Savings account have negatively affected Apple’s reputation.

Former employees from both Apple and Goldman Sachs who were involved in the development of the Apple Card have disclosed that executives at both companies were not prepared for the challenges of merging Apple’s West Coast tech approach with Goldman Sachs’ traditional New York-style banking culture. While Apple focused on captivating customers with sleek technology and dazzling products, Goldman Sachs prioritized regulatory compliance and profitability.

Interestingly, Apple’s unique demands for the credit card proved problematic during the pre-launch phase. These demands included billing statements aligned with the calendar month, instant cash-back rewards (which were ultimately not implemented), and the design of the physical card and customer agreements.

Anecdotal evidence of this misalignment arose when Apple CEO Tim Cook himself encountered difficulties in getting approved for an Apple Card during his own testing. The Goldman Sachs underwriting process rejected his application due to his status as a high-profile figure prone to impersonation. Credit bureau account flags associated with Cook also caused issues. While Goldman Sachs eventually made a one-off exception for Cook, these discrepancies raised internal concerns and eventually sparked an investigation by the U.S. Consumer Financial Protection Bureau (CFPB).

Additionally, shortly after the Apple Card’s launch, Goldman Sachs faced another investigation related to allegations of gender discrimination in credit limit increases. Although the bank was ultimately cleared of gender bias charges, friction arose between Goldman Sachs and Apple. Inaccurate statements, delayed payment postings, and problems with credit reports further soured the partnership.

As Goldman Sachs seeks to distance itself from consumer banking, the bank explored the possibility of transferring the Apple Card partnership to American Express. However, according to the terms of the deal established between Apple and Goldman Sachs, the Apple Card must operate on the Mastercard network until at least 2026, making this option unviable since American Express operates its own payment network. Furthermore, any new partner must also be approved by Apple, which, according to sources cited by The Information, may be challenging given Apple’s stringent terms.

Part of the issue with the profitability of the partnership lies in the fact that, owing to its eagerness to secure the deal with Apple, Goldman Sachs is not collecting the customary fees associated with credit card partnerships. The bank does not receive a portion of the fees that merchants pay to Apple to accept the Apple Card. Moreover, Goldman Sachs is unable to collect annual fees, late fees, or fees for foreign transactions because the Apple Card does not charge these fees. While Goldman Sachs does make money from loans issued to cardholders who choose to split Apple product purchases into installments, this revenue stream is insufficient to make the partnership economically appealing to a new partner.

Apple may consider partnering with a lesser-known bank to handle the regulatory functions while taking over underwriting, fraud prevention, and customer service. However, it remains unclear if this is the direction Apple will take. The Information’s report indicates that maintaining the relationship between Apple and Goldman Sachs may be untenable, and suggests that it could take up to 18 months to dissolve the partnership entirely.

For more comprehensive details about the complex relationship between Apple and Goldman Sachs, refer to The Information’s full report.

Our modern world thrives on partnerships and collaborations, but as the Apple and Goldman Sachs partnership demonstrates, true success lies not only in shared goals but also in alignment between contrasting cultures and priorities.