Nowadays Big Tech companies benefit from a more global reach and consumer trust than anyone, even than most banks. It is the exact combination of these two elements that makes Apple, as of March 2023, the world’s biggest company by market capitalization and the largest tech company by revenue.
In the past weeks, banks announced a loss of 60 billion dollars, just as Apple announced its new savings account in partnership with Goldman Sachs.
First of all, it is of great importance making clear what is Apple Savings: Apple Card users can now grow their Daily Cash rewards with a Savings account from Goldman Sachs, which offers an annual percentage yield (APY) of 4.15%, which is ten times higher than US national average. Moreover, the system is highly user-friendly: it has no fees, no minimum deposits or any balance requirements.
“Our goal is to build tools that help users lead healthier financial lives, and building Savings into Apple Card in Wallet enables them to spend, send, and save Daily Cash directly and seamlessly” said Jennifer Bailey, Apple’s vice president of Apple Pay and Apple Wallet.
Given the increasing lack of trust that people have in banks during these years (default of SVB, Signature Bank, First Republic), the success of Apple Savings was immediate: according to the first official data from Forbes, the service raised almost one billion dollars in its first week of availability, and this was only in the first four days.
The question is now the following: is Apple turning into a financial institution?
To be frank, there is no short answer. We are just living a time of transition, where Big Tech companies are saying goodbye to the Silicon Valley, meanwhile Wall Street is welcoming them.
But can tech companies do a better job in finance than actual banks?
Take BNP for instance, the company funds the loans largely from its balance sheet, which had a 165 billion in cash and marketable securities as of the first quarter of 2023, with total debt of 111 billion and much of that consists in short-term loans that can be withdrawn quickly. (This is exactly what happened at Silicon Valley Bank). The ratio cash-debt at BNP is in contrast with most banks, indeed they do their daily business with 90% borrowed money.
This is where Apple can actually fix banking, indeed with its huge equity funding it appears more stable than most banks.
The managing partner of Deepwater, Gene Munster, commented Apple’s next moves into the banking sector and said: “This will take five to ten years, but by then we’ll think of Apple in the same way as Citi, JPMorgan and Wells Fargo.”
But even if Apple looks and acts like a bank, it is not trying to become one of them in any official and traditional ways. That is probably wise, given that every time a tech company tries to break into finance, the results are not good at all. Consider Meta, who spent years trying to build its own stablecoin (Diem), while the government was trying in any feasible way to take the project down.
That is one of the reasons why at Cupertino they have to be extremely careful with regulators and antitrust issues if they want to step into the banking system. Until then, we’ll see iPhones doing banking.
Charlotte Principato, an analyst at Morning Consult, a business intelligence company, commented: “The more information you have about a consumer, the better lending decisions you can make.” And Apple “is sitting on a mountain of data”, thus there is a high probability of success for the American firm.