Goldman Sachs submitted a regulatory filing today for its “Platform Solutions” group of businesses that includes Apple Card. The collection of consumer offerings from Goldman is on track for a loss of $4 billion since 2020 with Apple Card making up more than $1 billion of that.
Reported by Bloomberg, the new performance details from Goldman’s Platform Solutions division paint a grim picture. In just the first nine months of 2022, the businesses including Apple Card saw a pretax loss of over $1.2 billion.
Looking back to 2020 through the end of September 2022, those losses amounted to $3 billion. But when Q4 results of 2022 are included soon, the number is expected to be close to $4 billion.
Apple Card was launched in the US back in August 2019 and it’s unclear exactly how much of the $4 billion in losses have stemmed from it. However, sources close to the matter believe most of the $1 billion loss in 2021 came from Apple Card. And there are another $2 billion in 2022 losses believed to mostly come from Apple Card and one other Goldman lending platform called GreenSky.
With all of that in mind, plus the unknown of how much was lost on Apple Card in 2019 and 2020, it looks like Goldman has spent somewhere between $1-3 billion on the consumer credit card. The main cause of the losses is said to be from loan-loss provisions (when a bank sets aside money as an expense for future loans it expects won’t be repaid).
Previous estimates inside Goldman aimed for breaking even with the Platform Solutions division by 2022, now the company is hoping it could do that in 2025. Sources believe the transaction-banking business line is likely the only profitable part of the Platform Solutions division.
The most common question I hear when Apple Card comes up is “why haven’t they launched it in any other countries?!”
Getting a look into the challenging economics of launching a credit card could definitely explain why Apple hasn’t expanded the product in more than three years since it debuted. A six-year or even longer break-even would be difficult from the perspective of getting Goldman to invest more to expand or Apple trying to partner with another bank in different countries.
The credit card market is stiff with lots of competition. While Apple definitely has a leg up with sharp iPhone software integration, strong security features, and no annual fee, it’s relatively weak when it comes to incentives like its Daily Cash back program.
Apple offers 3% back on Apple purchases and at a few select retailers and 2% back with Apple Pay purchases, but most purchases earn just 1%. That’s tough when other cards offer 5% rotating categories at popular retailers that consumers are more likely to shop at regularly among a range of other benefits.
Are you using Apple Card? Is it your main card or just for Apple purchases? Share your thoughts in the comments!