NEW YORK (Reuters) – Goldman Sachs Group Inc credit card deal with Apple Inc, the latest move of the Wall Street investment bank for the right mass-market for consumers to connect Goldman, with hundreds of millions of iPhone users.
FILE PHOTO: The logo of Apple is seen in a shop in Zurich, Switzerland, 3 January 2019. REUTERS/Arnd Wiegmann -/File Photo
But Goldman is entering a crowded market for co-branded cards, where retailers often have the upper hand, and analysts question how much tolerance and its shareholders will have for the cultivation of the bank’s young consumer business by means of credit card loans.
Goldman is the court for consumers since the 2016 launch of the online bank Mark, and with the first credit card is targeted against payment conscious ones. There are no annual or additional fees, and the customers pay annual variable interest rate between 13.24 percent and 24.24 percent, according to the Apple web site.
Apple and Goldman has no information about the economic terms of their partnership when it was announced on Monday.
But the banks are increasingly willing to take less favorable deals because the post-financial crisis regulations of the credit card company attractive to lenders, who are required to hold less capital against such debt against other assets.
“If this kind of a benign credit environment continues, retailers have greater leverage than they had a few years ago,” said a person involved in similar credit card offers.
The issuing banks retain control of the approval of the customers for the cards, often with the help of data from the seller to the shoppers as part of the process, the person said.
Goldman Chief Executive David Solomon said in an e-mail to employees on Monday that the map is an “important step” in the bank plan to expand the consumer business.
Solomon has said: the consumer business, is a critical part of the bank’s strategy to increase their revenues and reduce costs, the revenue shrinks in the traditional areas of strength for Goldman as bond trading.
But many investors are at ease with Goldman growing its unsecured consumer debt, especially at a time when many are speculating that a recession may be looming, said UBS analyst Brennan Hawken.
Marcus now has $45 billion in customer deposits in the United States and the united kingdom, and has $5 billion in personal loans, according to Solomon’ s e-mail.
While the amount of loans is small compared with the bank’s overall balance sheet, Hawken said investors would probably prefer Goldman stick to the use of the consumer business to add deposits, in contrast to the personal loan or credit card debt.
“People want Goldman to be Goldman,” Hawken said. Goldman refused to comment on this article.
The Apple Card is a wide interest range indicates that some customers have lower credit scores, said Josh Siegel, chief executive of StoneCastle Financial Corp. the bank may not, However, necessary that the risk in the books.
“They can securitize the debt, and is not something new for an investment bank,” Siegel said. “I can’t imagine that Goldman Sachs, all of a sudden, especially with where we are in the credit cycle, is going to go long on unsecured consumer debt.”
If this is Goldman’s first foray into the credit cards, the bank a year or two for the review of the quality of credit decisions, according to an industry expert who declined to be named.
The same person who said that the indicated range of possible interest rate on the unpaid balance was too large to clearly show how much credit risk to Goldman is expected to take.
Credit risk concerns aside, analysts said that Goldman’s decision to launch its first credit card in cooperation with one of the largest companies in the world, it gives the possibility to the consumer of the market share.
FILE PHOTO: the Goldman Sachs logo is displayed in the company space on the floor of the New York Stock Exchange (NYSE) in New York, USA, April 17, 2018. REUTERS/Brendan McDermid
While Apple says that its card is “made by Apple, not a bank,” according to the website, the Goldman Sachs logo is displayed on the back of the card.
“For Goldman this is a game for the mass distribution without digging too much,” said Lex Sokolin, global director of fintech strategy and a partner at Autonomous Research.
“It makes their brand way better at least in the retail and mass affluent marketplace.”
Reporting By Elizabeth Dilts and Anna Irrera in New York. Additional reporting by David Henry in New York and Stephen Nellis in California; Editing by Neal Templin and Meredith Mazzilli