05 February 2024 |

Has Apple Card Been a Success?

By Alex Johnson

Apple Harvest (1888) by Camille Pissarro.

3 FINTECH NEWS STORIES

#1: Has Apple Card Been a Success? 

What happened?

Apple announced some updated stats on the Apple Card:

  • More than 12 million customers.
  • In 2023, users earned over $1 billion in Daily Cash from spending on Apple Card.
  • The vast majority of users auto-deposit their Daily Cash into Savings, and nearly two-thirds of users have deposited additional funds from a linked bank account to further help them save for the future.
  • Nearly 30 percent of Apple Card customers make two or more payments per month.
  • More than 1 million Apple Card users share Apple Card with their Family Sharing Group through Apple Card Family, and nearly 600,000 users are building credit equally with their spouses, partners, or another trusted adult on Apple Card.
  • Over 200,000 users and counting have been approved for an Apple Card after enrolling in the Path to Apple Card program and successfully following the program’s personalized steps, which are designed to improve a user’s financial health.

So what?     

Cool! 

But is all that, you know, good?

Let’s break it down:

  • As others have noted, 12 million feels a little low. I know the product is still relatively new (launched in 2019), but there are something like 135 million iPhone users in the U.S. A 9% penetration rate after five years, despite a presumably healthy marketing budget (I hear a lot of Apple Card podcast ads) feels a bit disappointing.
  • Spending seems fine for a 5-year-old card. Sheel ran the numbers. It averages out to about $5,500 per user per year. As Sheel notes, though, Delta drives significantly more spend through a smaller number of cardholders. What is Apple’s ambition to grow spend?
  • The savings account attracted more than $10 billion in just a few months, which still blows my mind. Two-thirds of users linking a bank account to deposit more funds is also very impressive.
  • The company is trying to position the “30 percent make two or more payments a month” thing as a sign that users are financially healthy, but I don’t really get that argument. The Apple Card UI is spectacular and very customer-friendly, but I wish Apple had told us how many customers revolve a balance. That’s what we want to know!
  • An interesting sign of Apple’s scale. A middle-of-the-pack bullet point in the company’s press release would be MASSIVE news for most of the fintech startups working in the family banking space.
  • The Path to Apple Card program is, low key, my favorite Apple Card feature. I wrote about the need for an adverse action notice VIP experience. Apple is the only company I’ve seen that has tried. More lenders should do this! 

Overall, Apple Card feels like a really strong proof of concept (the design and features are top-notch, and the rewards are competitive) that the company hasn’t (yet) put a lot of chips down on. I’d be so curious to see how the product would perform If they freed it from the confines of Apple Wallet and really let it ride.

Which partner(s) Apple picks to replace Goldman Sachs (who was, hilariously, quoted in the Apple press release) will tell us a lot about how serious they are about Apple Card moving forward.

#2: Skating to Where the Puck Is At This Exact Moment

What happened?

Finvest, an early-stage B2C wealth management startup, raised $2.7 million to help consumers invest in U.S. Treasury Bills:

Shivam Bharuka, co-founder and CEO of Get Moving, started working on Finvest in 2023. With interest rates at such high levels, Bharuka wanted to take advantage of the environment — however, banks were giving pennies on the dollar, he told TechCrunch.

He was part of the Winter 2023 Y Combinator cohort, however, Bharuka initially went in with a logistics-focused company for India. He ended up pivoting when he noticed the pain points associated with buying Treasury Bills.

He and his team are developing Finvest to make the purchase, management and selling of U.S. Treasury Bills seamless. The company partners with a brokerage firm to execute the trades.

So what?     

Investing in T-Bills in this rate environment makes a lot of sense. And the legacy solutions for accessing this investment opportunity are … well, antiquated would be a very generous word choice. 

Some fintech innovation in this area would be nice!

But here’s the thing – we’ve already got it! Jiko, which this TechCrunch article on Finvest bizarrely doesn’t mention, raised a $40 million Series B in 2022 to build this (and build it closer to the metal … Jiko is a bank, and it owns a registered broker-dealer). Public launched T-Bill investing (with Jiko) in January of 2023 … right around the time that Finvest was going through Y Combinator. 

Building a B2C investment app that only offers T-Bills (and an accompanying high-yield cash management account) after a much, much bigger competitor had already launched the same offering and at a time when the Fed was already signaling that it would start to lower interest rates is … an interesting choice.

This is something I’ve noticed before – YC seems to really encourage its founders to skate to exactly where the puck is at that moment.  

#3: A Steal!

What happened?

Another interesting fintech company in the wealth management space. Marstone, embedded wealth management for community banks and credit unions, raised a Series B:

Marstone … today announced it has raised an $8M Series B financing round led by Mendon Venture Partners and South Rose Capital, alongside new investors including the Castle Creek Launchpad Fund. The round also includes existing investor Equity Bank (NYSE: EQBK). Marstone enables financial institutions to retain and generate deposits, increase non-interest income, and improve client servicing and satisfaction by launching a wealth practice for less cost than an average full-time hire.

Marstone’s platform has recently been adopted by Woodforest National Bank, Equity Bank, and Red River Credit Union to deliver a modern user interface, paperless account opening, flexible goal planning, performance reporting, data aggregation, portfolio trading and rebalancing, asset allocation, risk assessment, and more.

So what?

Interesting!

Seems like the community banking equivalent of embedded stock trading provided by DriveWealth and Alpaca. 

Marstone’s version appears more focused on passive investing (no ability to buy individual stocks), and it looks like the integration with financial institutions that don’t already offer wealth management is a bit clunky compared to the true embedded model offered by Alpaca and DriveWealth. Not terribly surprising, given the target audience (community banks and credit unions).

Overall, though, I like the concept. Community banks and credit unions remain, in the aggregate, a massive and underserved distribution channel for new capabilities. It’s not a lot of fun to sell to them (or to existing distribution partners in that space like Jack Henry), but it can be highly lucrative (and with obvious built-in exit paths if an acquisition becomes necessary).

Speaking without the benefit of any inside information, an $8 million Series B feels like a steal.


2 FINTECH CONTENT RECOMMENDATIONS

#1: The Next Great Consumer Fintech Company (by Simon Taylor, Fintech Brain Food) 📚 

Simon does a great job in this piece distilling down the essential factors that drive success in B2C fintech (generational brand preferences and technology megatrends) and then spends some brain power speculating on what the B2C fintech apps that succeed with Gen Z might look like.

#2: The Apple Vision Pro’s Missing Apps (by Ben Thompson, Stratechery) 📚

Simon talks a bit about spatial computing and the Apple Vision Pro in his piece, but if you want a deeper dive into that product and how it fits into Apple’s broader strategy, read Ben Thompson’s piece.

Also, just generally, read Ben Thompson. He’s the GOAT for tech analysis.


1 QUESTION TO PONDER

What big topics would you like me to cover this year? Bonus points if you suggest topics that I haven’t spent much time on before!