topic Re: Goldman / Apple in Credit in the News

Goldman / Apple

Im-back — Tue, 17 Oct 2023 03:16:16 GMT

From the Wall Street Journal 16 Oct.

Goldman Sachs Wants Out of Consumer Lending. Employees Say It Can’t Happen Fast Enough.

Anone else read the article and if so, thoughts? Seems the Apple savings account has added to the turmoil.

Re: Goldman / Apple

CreditPacMan — Tue, 17 Oct 2023 06:13:06 GMT

I cannot for the life of me figure out why Goldman is losing money on their Apple partnership. I mean they seem to have a pretty strict underwriting process, and yet the % of defaults on their cards is high. Of course we do not know the contractual agreement it has with Apple; maybe Apple is taking a cut that's affecting Goldman's bottom line.

Anyway, seems like offloading the partnership to AMEX will be a big one for the latter.

Re: Goldman / Apple

coldfusion — Tue, 17 Oct 2023 12:27:44 GMT

This is the article OP is referencing. There are others elsewhere basically reporting the same.

They've already effectively exited the personal loan business.

https://www.wsj.com/finance/goldman-sachs-wants-out-of-consumer-lending-employees-say-it-cant-happen-fast-enough-17e98a30

Goldman did release their earnings report this morning, as expected profits took a hit but not quite as badly as the market had predicted.

Re: Goldman / Apple

CreditCuriosity — Tue, 17 Oct 2023 18:44:17 GMT

@CreditPacMan wrote:
I cannot for the life of me figure out why Goldman is losing money on their Apple partnership. I mean they seem to have a pretty strict underwriting process, and yet the % of defaults on their cards is high. Of course we do not know the contractual agreement it has with Apple; maybe Apple is taking a cut that's affecting Goldman's bottom line.

Anyway, seems like offloading the partnership to AMEX will be a big one for the latter.

UW for the apple card is not tough by by any means you just need a basic pulse. This is why GS wants to get rid of card due to charge offs due to lack of difficulty of UW standards that was likely put in place in conjunction with apple. Just cause a person wants and has iphones/mac doesn't mean they are financially savoy and can afford them or manage credit/finances wisely.

Re: Goldman / Apple

sjt — Wed, 18 Oct 2023 20:16:10 GMT

@CreditCuriosity wrote:
@CreditPacMan wrote:
I cannot for the life of me figure out why Goldman is losing money on their Apple partnership. I mean they seem to have a pretty strict underwriting process, and yet the % of defaults on their cards is high. Of course we do not know the contractual agreement it has with Apple; maybe Apple is taking a cut that's affecting Goldman's bottom line.

Anyway, seems like offloading the partnership to AMEX will be a big one for the latter.
UW for the apple card is not tough by by any means you just need a basic pulse. This is why GS wants to get rid of card due to charge offs due to lack of difficulty of UW standards that was likely put in place in conjunction with apple. Just cause a person wants and has iphones/mac doesn't mean they are financially savoy and can afford them or manage credit/finances wisely.

Plus, add in the lack of fee revenues and lower APR rates.

Re: Goldman / Apple

LeolaReed — Sat, 28 Oct 2023 06:18:19 GMT

Thank you for the article link, you made my day

Re: Goldman / Apple

LADave — Sat, 28 Oct 2023 18:04:24 GMT

Losing money as a credit card operator is like losing money as a casino operator: it's practically impossible if you're even halfway good at what you do, but it's certainly not impossible if you don't know what you're doing. And it's now clear that Goldman Sachs didn't know what they were doing.

Although the terms that they agreed to aren't known, it is known that companies like Synchrony balked. They bill at the same time each month, which creates an avalanche of customer service issues at the same time every month that inevitably makes it difficult to manage. They appear ill-equipped to handle chargeback issues, which creates a flood of CFPB complaints. When legitimate chargeback issues get ignored, they get filed again, creating more customer service headaches. The lack of late fees almost seems designed to encourage defaults, and they seem to be very bad at pursuing deadbeat customers.

How much of that was insisted upon by Apple, and how much of that was Goldman's own doing? That info appears to be confidential, but even if most or all of it was upon Apple's insistence, Goldman still agreed to it - while other banks that have experience running a profitable credit card business didn't.

Perhaps they had a plan to make money on the back end by getting Apple Card customers into other Goldman products, but whatever plans they had were either nebulous or weren't allowed by their agreement with Apple. And even if they did, those consumer products are either no longer operated by Goldman or are being wound down by them.

And then they opened savings accounts, which will make it even more difficult to hand the card to another bank! There's a reason why successful consumer banks don't offer co-branded savings accounts: if they lose the co-branding partnership, they'll need to borrow money from somewhere else to pay off the depositors.

What originally looked like one of the most successful credit card launches is actually a toxic asset that Goldman Sachs can't seem to get rid of. Perhaps their best way out of the card (or at least to more favorable terms) would be to threaten a lawsuit alleging a one-sided contract by Apple. They probably won't, because that would make it crystal clear to everyone who isn't already convinced that Goldman Sachs (supposedly one of the smartest investment banks in the business) didn't know what they were doing.

Re: Goldman / Apple

LADave — Wed, 29 Nov 2023 05:56:27 GMT

Well, well, well... From the WSJ this evening: "Apple Pulls Plug on Goldman Credit-Card Partnership"

Apple sent a proposal to Goldman Sachs to dissolve their partnership over the next 12-15 months, including both the card and the savings account. Synchrony and American Express are prominently mentioned, and the article notes that it's not known whether Apple already has a partner lined up for the card.

Re: Goldman / Apple

911gt34life — Wed, 29 Nov 2023 11:49:22 GMT

The worst bank apple could go for

comenity

synchrony

Worst case scenario Banks

Re: Goldman / Apple

Guyatthebeach — Wed, 29 Nov 2023 13:56:28 GMT

I don't think this will end well for the consumers. I don't think Barclay or CapitalOne will have interest in the Apple Card with current fee structure or lack of fees. Personally I think Apple will have to agree to more fees and stagger the statement closing dates and payment due dates.

After seeing the news that Apple is going to work with Goldman Sachs to end the relationship, I don't think another bank or Fintech will take interest is the Apple Card portfolio in its current form.

We will wait and see.

Re: Goldman / Apple

MarkintheHV — Wed, 29 Nov 2023 14:50:21 GMT

I wonder how it work work out if AmEx took over the Apple credit cards and started to tighten credit requirements and adjusting credit lines? I can see a lot of teeth gnashing and complaining if that were to come to fruitation

Re: Goldman / Apple

LADave — Wed, 29 Nov 2023 22:30:00 GMT

@911gt34life wrote:
The worst bank apple could go for

comenity
synchrony

Worst case scenario Banks

Comenity seems to have so many technical issues that they would be an odd choice for Apple.

Re: Goldman / Apple

Centurion_Dreamer — Mon, 04 Dec 2023 19:33:40 GMT

Perhaps Chase is a possible option according to this news article here:

https://www.bloomberg.com/news/newsletters/2023-12-03/apple-to-drop-goldman-sachs-for-apple-card-chase-bank-is-ideal-replacement-lppjbe7z

Re: Goldman / Apple

JenW83 — Thu, 18 Jan 2024 16:27:07 GMT

@CreditPacMan wrote:
I cannot for the life of me figure out why Goldman is losing money on their Apple partnership. I mean they seem to have a pretty strict underwriting process, and yet the % of defaults on their cards is high. Of course we do not know the contractual agreement it has with Apple; maybe Apple is taking a cut that's affecting Goldman's bottom line.

Anyway, seems like offloading the partnership to AMEX will be a big one for the latter.

I'm pretty surprised that the Apple Card had such high default rates. It's my 2nd highest used card (behind my Amex), so I would be ecstatic if Amex took over. I like the flexibility that Apple Card offers, and the ability to change card numbers any time you need to.

I would also be okay if Chase took over, and converted the card into a Visa.