The end of March was an eventful period for Apple Inc. (NASDAQ:AAPL). During the final week of the first quarter, Apple held a widely anticipated event. Among the A-listers were Jennifer Aniston, Steven Spielberg, Oprah Winfrey and Reese Witherspoon.
One of the big reveals at the Apple event was Apple Card, the iPhone maker’s first foray into the credit-card business.
A self-proclaimed innovative credit card, AAPL emphasized its ability to help customers “lead a healthier financial life.” Moreover, the “Apple Card is built into the Apple Wallet app on iPhone, offering customers a familiar experience with Apple Pay and the ability to manage their card right on iPhone.”
Via its Apple Pay mobile payments business, the tech firm has long been a player in the mobile payments arena. With Apple Card, it’s looking to bolster its fintech and financial services footprints. Debuting in the U.S. this summer, the card is designed to offer a competitive alternative to traditional, rewards-based credit cards.
“Customers will receive a percentage of every Apple Card purchase amount back as Daily Cash,” said AAPL’s management team. Unlike other reward programs, members can receive qualifying Daily Cash immediately for their personal usage. Furthermore, every time customers use Apple Card in conjunction with Apple Pay, they’ll receive 2% Daily Cash. If they make purchases through the company’s retail channels, that figure bumps up to 3%.
With 2% cash back, Apple’s credit-card venture represents a direct threat to the establishment. Several competing options only offer 1% to 1.5% cash-back rewards on everyday purchases.
Apple Card Boasts Some Credibility
It is too early to assess the impact of this new venture on Apple stock. In the final week of March, AAPL closed modestly lower. But for the month, shares jumped 9.70%, capping a first-quarter gain of 20.4%.
Despite some hesitation toward Apple’s new venture, the Apple Card levers serious clout. For instance, Apple partnered with Goldman Sachs Group (NYSE:GS) to make the card a reality. Goldman, too, benefits strongly from the newfound relationship. The banking giant has been expanding its footprint in the consumer-finance space for several years. Additionally, Goldman’s consumer-finance business, Marcus, has more than three million customers, “$45 billion in deposits and $5 billion in consumer loan balances.”
With Goldman as the issuing bank, Mastercard (NYSE:MA) stepped up to provide branding and the global payments network. Apple also introduced a titanium card, which the company believes has some enhanced security features compared to traditional charge cards.
The details certainly intrigue. According to the tech firm:
With no card number, CVV security code, expiration date or signature on the card, Apple Card is more secure than any other physical credit card. All this information is easily accessible in Wallet to use in apps and on websites. For purchases made with the titanium Apple Card, customers will get 1 percent Daily Cash.
Bottom Line for Apple Stock
Apple Card could prove to be a nice accompaniment to the underlying company’s other revenue streams. But for now, Wall Street is more concerned with declining iPhone sales. Also, AAPL lags in streaming content and the entertainment arena.
Here, investors wanted answers about exactly how the device maker’s foray into original content will change entertainment. They left largely unimpressed with management’s commentary on their streaming service, leaving many questions unanswered.
With Apple still scuffling in the streaming industry, analysts continue floating the idea of a takeover of Netflix (NASDAQ:NFLX). However, large-scale acquisitions historically are not part of the company’s DNA.
So at the end of the day, AAPL has more pressing issues to address to assuage investors. While their plastic venture is interesting, it just doesn’t have enough impetus to move the needle for Apple stock.
As of this writing, Todd Shriber does not own any of the aforementioned securities.
