Apple Card's future uncertain as Goldman Sachs seeks exit
What's the story
Apple Card, the credit card service launched six years ago, may be facing a major shake-up. The company behind the card, Goldman Sachs, is reportedly looking to exit the partnership. JPMorgan Chase is said to be a top contender for taking over the Apple Card partnership. Other potential candidates include American Express, Capital One, and Synchrony, but they don't seem likely to take over at this time.
Financial impact
Goldman Sachs's losses and Apple Card's customer base
The Apple Card partnership has cost Goldman Sachs over $1 billion, contributing to total consumer product losses of $6 billion. Not all of these losses are from credit delinquencies, as the Apple Card offers no foreign transaction fees, late fees, or returned payment fees. It also provides up to 3% cash back on partner merchants and 0% APR financing on Apple products.
Takeover hurdles
JPMorgan Chase's potential takeover and challenges
JPMorgan Chase is said to be the "preferred choice" for taking over the Apple Card partnership. However, a deal has yet to be signed. One of the major challenges with this takeover is Apple Card's high percentage of subprime customers. As per reports, a subprime customer is someone with a credit score below 660 and currently makes up about 34% of Apple Card's user base.
Delinquency concerns
Apple Card's delinquency rate and potential changes
Apple Card also has a delinquency rate of around 4%, higher than the industry average of 3.05%. These factors could lead to a deal only being made if a new lender can get it at a "huge discount." The current balances on Apple Card exceed $20 billion. If JPMorgan Chase doesn't go through with the takeover, Capital One could be another strong contender.