Apple is revitalizing its business model by introducing several new financial services. Reportedly, Apple plans to rely less on its current financing partners, including Green Dot, Square, and Paypal.
Green Dot saw its stock fall 8%. Apple partner CoreCard saw an even more dramatic fall of 16%. Even financial services giant Goldman Sachs also saw lower share prices in January.
These companies have profited greatly from their relationships with Apple. By cutting out some or all middlemen, Apple would be streamlining and optimizing its fintech strategy. In the wake of this Apple news, the company saw a temporary spike in its share price. By the end of trading, however, its stock had returned to its original price.
According to a report from Bloomberg, Apple sees a lot of growth potential in the fintech sector.
“Unique circumstances created by the COVID-19 pandemic have forced more people to get comfortable with financial technology,” said Keith Lewis of the Standard.
Apple’s Fintech plans go beyond mere payment processing. It plans to build capabilities for lender risk assessment, fraud detection, and routine credit checks. Naturally, taking these functions in-house could ultimately improve Apple’s profit margins.
Fintech independence “could help fuel further growth for Apple,” said Matthew Fox of Yahoo Life. Apple hasn’t announced any specific plans to cut ties with current Fintech partners.
Presently, the Apple credit card uses Green Dot and CoreCard as go-to transaction processors, and these companies send card transactions to banks for instant approval.
Goldman Sachs handles all risk assessment and credit checks for the Apple Card and specific customer service functions related to credit cards. It is unclear how much of Goldman’s business comes from Apple.
“Having a Fintech platform embedded in all iPhones is important,” Fox reported. The iPhone is gradually becoming a comprehensive lifestyle tool.
Apple already provides the public with a co-branded credit card, a peer-to-peer payment system, and an online Wallet app. Merchants can also receive credit card payments from customers’ iPhones.