I was about to write a really nice piece about Apple’s announcement of the launch of a new credit card, in partnership with Goldman Sachs, when Brian Roemmele beat me to it. Who is Brian Roemmele you ask? And if you are asking that … WHERE HAVE YOU BEEN?
Brian is a great speaker and prolific author and advisor, with a new book under development called The Last Interface, focused upon natural language voice usage as our easiest way of dealing with technology (think Alexa and Siri in twenty years from now).
Anyways, Brian wrote a brilliant piece on Quora that he’s allowed me to reproduce here. Enjoy!
What is Apple Card, the new credit card from Apple and why is it important? by Brian Roemmele, Founder + Editor at Read Multiplex (2017-present)
Not only is it a revolution in Apple design, it may just become a new central income stream for Apple services.
Specimen of the Apple Card promotion from Apple.
Apple Card: A Sublimely Simple Yet Profoundly Powerful New Apple Services Income Stream
On March 25th, 2019 Apple announced a revolution in how payment cards  will work in the future. More than just a co-branded credit card, this is a well thought out deeply engineered new Apple product.
Specimen, Tim Cook introducing Apple Card.
My Personal Payment Journey
Back in 2008, I began to speak publicly about Apple becoming deeply involved in payments. It would be a great understatement to say just about everyone in the payments world and in the tech world found my assertions to be ludicrous. By 2012 on Quora  I tried to alert startups and legacy payment companies that it is futile and redundant to build many alternative payment systems that does not account for Apple using NFC and ultimately creating Apple Pay, Apple Pay Cash, Apple Card and ultimately an Apple merchant payment processing solution that include macro-payments, micro-payments and nano-payments ultimately. Few listened in fact some got publicly hostile towards me and branded me “un-hireable” at their payment startup because I dared to predict Apple would move to the payments business. That was a bit disturbing to me, I forgive but I don’t forget.
In 2012, quite a few years before the NFC based Apple Pay system was released I said :
“It is clear to me that Apple will move to NFC…”
I went on to not only predict Apple Pay  but to build the largest Apple Pay map in the world that offered a reminder, push notification when you enter an Apple Pay accepting retail location .
Specimen, the Pay Finders commercial series.
I have not continued my work on Pay Finders for Apple Pay for a number of reasons. I still feel rather strongly however that push notification of Apple Pay acceptance locations are critical as well as my map which is still the largest Apple Pay map in the world.
In 2014 I said :
“We will see Apple present new extensions (to Apple Pay) that will use far more refined and richer experiences as Apple begins to integrate the back end of retailer’s POS systems. This will include data sent to the Apple Pay user based on the transaction inside of a real and effective receipt system”
I present this personal journey for those that choose to be honest in the face of celebrity startups and trillion dollar valuations, that it is better to be lucid and direct, than to drink the cool-aide and say: “wow this is a great idea folks”, I have the scars you can research here on Quora to prove it, but today it is worth it. A few days before today’s announcement I had this precognition Tweet:
The new Apple Pay will begin to surface on March 25th, 2019. It will be deeply weaved into new subscription models. Ultimately there will be an astounding new use case for micro transactions with Apple Pay Cash, fundamentally changing the former advertising models for content.
Specimen, a Tweet.
If one were to analyze all of the millions of dollars that was wasted on wallets, new fangled ways to pay, new person to person payment systems and other digressions, it would total in to the hundreds of millions of dollars, all lost for no particularly good reason then “not invented here” mentality. Today, Apple indeed has rendered many business plans and business models irrelevant and redundant for many reasons.
What Makes Apple Card So Special?
Unlike any payment device before, Apple Card is fully engineered to an extent that only few companies have achieved in any product and has not been seen before in the payments business. By engineered I am speaking to not only the technology behind the product but the experience you will have using the product.
Apple Card completely rethinks everything about the credit card, breaks it down to the fundamental essence and rebuilds it in modern engineered Apple-like delight. It represents all the things Apple stands for:
- Apple Card builds on the ease and security of the foundation of Apple Pay.
- The first card that encourages you to pay less interest.
You can buy with your iPhone like any Apple Pay payment card or use the Apple‑designed titanium card anywhere in the world that does not accept Apple Pay. The Apple Card lives on the iPhone, in the Wallet app. Because of this it makes all kinds of new things possible.
Specimen showing Siri AI presenting your transaction information privately.
When you buy something using the Apple Card, you get a percentage of your purchase back in Daily Cash deposited to your Apple Pay Cash card. Not in a month from now like every other rewards card, but every day. There’s no limit to how much you can get back. The pure brilliance is Daily Cash goes right onto your Apple Cash card, so you can use it just like cash. This is profoundly important. Why? In one product Apple actually created two products:
- Apple Card
- The New Apple Cash Card with an income stream from Apple Card
Nothing has ever been done like this before. Apple in effect is creating “new money” that has no net cost to Apple. Like all reward points cards, the cost of the reward points are actually paid by the actual merchant you paid using the payment card as the merchant account rate. In most cases, retail merchants that effectively negotiate their rates, are paying about 1.8%-2.25% for many reward cards. A portion of this funds that actual Daily Cash that accrues to the Apple Card user.
Apple also earns income from the part of the Interchange, a portion of the merchant fee that Goldman, the credit card issuer collects from the merchant fee mentioned above, anytime the user pays any merchant with the Apple Card. When the Apple Card is used at Apple or special partner merchants, Apple pays no true Interchange fee and thereby saves the ~2% of which is part of the amount paid back as daily cash. I spoke of this in 2014 the day Apple Pay was announced  and produced a rather woodsy pie chart to illustrate how a typical Apple Pay transaction, prior to the Apple Card incurred fees and revenue to Apple. In this chart we see just about all fees charged to Apple eliminateted when Apple is the card issuer, and thus the recipient of the Interchange fee and processor fee and of course the merchant payment is to Apple.
Specimen, wood cut of how Apple Pay earns revenue.
The reward/ loyalty points aspect is not new. The new aspect is that Apple is funding a second payment card Apple Pay Cash card with “free” “found money”. This means Apple did not incur any material costs to create the money and move the money to the Apple Card user. In effect Apple is creating a “new economy” where Apple has “money in the bank” and they will go on to earn income in two fundamental ways:
- When the Apple Pay Cash card user pays any merchant, Apple gains revenue on this transaction.
- When the Apple Pay Cash card user pays Apple, Apple does not inure any merchant payment fee because they are the merchant and the card issuer.
Astounding And Surprising New Apple Service Income From Apple Card
All of this has an incredible momentum effect for new revenue streams for Apple and frankly new impulse sales because of this new “found money” the Apple Card user will see accrue on every transaction they perform.
Consider a 99¢ app purchase, currently Apple incurs about 13¢ payment processing fees of the 99¢ transaction. If the user is induced, and have no doubts Apple will offer inducements, to use Apple Pay Cash Daily Cash to pay, Apple pays $0. Lets look at that again, $0 vs. about 13¢. This alone would represent millions of dollars of new revenue for Apple. Payments for Apple will move from being a loss leader to a net revenue stream.
How much new revenue would this generate? It is not too early to suggest that over the arc of 10 years, about 10% of Apple pure profits can come from payments alone. I do not arrive at this prediction lightly, the compounding effect is quite powerful. To add some aspect of how I make these predictions, I have been in the payments business since 1986.
Apple Daily Cash As The New eBay/PayPal “Found Money” Model
The thing that most folks, even payments experts don’t clearly understand, even in 2019 is how eBay + PayPal became so powerful. Indeed the network effect had a great deal to do with it, but also it was the “free” “on us” money that flowed from someone selling their old stuff in their garages and basements on eBay, thereby creating “new money” that was deposited at “no cost” in a PayPal account. Understand that this way of funding is far less than the ACH system and credit/debit card funding into PayPal. What eBay/PayPal did was create “new money” from stuff that may very well have been tossed away.
Specimen, of monthly accrued Daily Cash.
Today Apple has created “new money” that gives them top of the wallet, first in line, use of these funds. I am predicting that about $75 of every $100 in Apple Card Daily Cash will be collected by Apple for products and services. And even is those funds are not spent at Apple, Apple will still earn income from the use of the Apple Pay Cash transaction as part of the interchange all MasterCard transactions incur.
The details on Daily Cash is:
- Get 3% back on everything you buy from Apple, whether you buy it at an Apple Store, , the App Store, or iTunes. That includes games, in‑app purchases, and services like your Apple Music subscription and iCloud storage plan.
- Get 2% back every time you buy something using Apple Pay. That’s in every category, with no limits. Imagine all the things you use a credit card for every day — at Target, Walgreens, Lyft. You get 2% back on just about everything.
- Get 1% at a store, website, or app that doesn’t take Apple Pay, Apple Card gives you 1% of your purchases back in the form of Daily Cash.
The Apple Card payment is due on the last day of the month, an easy to remember, system that makes sense. You can also set up weekly or biweekly payments to match when you get paid.
By paying more often, it helps you save on interest. Apple Card sends reminders when the due date is coming up, using Apple Wallet push notifications. These two aspects are fundamentally important as they will aid in accurate and timely payments quite beyond standard payment cards. About 67% of late credit card payments are from not remembering the payment was due, or out of sequence pay checks. Apple Card goes a long way to solve this issue. I predict Apple will have one of the highest on-time payment records in the industry.
Apple Card is about to change the whole premise many credit cards use to drive income, interest. You can save on interest of course by paying the balance in full every month. But when you can’t do that, Apple Card does the math for you. You choose an amount you wish to pay $536, $643, $2,324 and the automated Apple Card estimate system will calculate the interest cost for you, in real-time. The variable APRs you pay for Apple Card ranges from 13.24% to 24.24% based on creditworthiness, this is on the low medium standard in the industry. The Apple Card also offers up smart payment suggestions that encourage you to pay a little more than you normally would, and helps you pay off your balance faster with lower or no interest charged.
Most credit cards have fees of course, but Apple is doing quite a bit to eliminate just about all of them:
- No annual fees.
- No cash‑advance fees.
- No international fees.
- No over‑the‑limit or returned‑payment fees.
- No hidden fees.
- No surprises.
If this is not enough, if you miss a payment, there is no charge for penalty rates.
Siri AI + Apple Business Chat
Every time there is a purchase you get an instant notification from Apple Wallet. You’ll also be notified of any unusual activity. If you don’t recognize a charge you just tap to let Apple know. If you have a question, you could call or you can use Apple Business Chat integrated into Apple Card. This is a brilliant combination of Siri AI technology, prompting simple questions and answering and/or guiding you to a result or seamlessly turning the chat over to a live agent.
This use of Siri AI is also quite sublime in this context as 80% of questions will be easily answered or acted upon by Siri AI over Apple Business Chat. This is called “dog fooding” in the tech industry and many folks will miss just how important this aspect of Siri AI and Apple Business Chat will be moving forward as these services infuse into just about all of Apple services.
I wrote just how important Apple Business Chat is to Commerce and Voice Commerce via Siri in 2017 . Apple Business Chat has formed the basis of Apple live customer service for over two years while many astute observers did not notice. A vast majority of customer service responses were formed by Siri AI and no one really noticed. This same platform will form the basis of Apple Card customer service. It will also form the basis of a Voice Commerce system formed around Siri and Apple Card and Apple Pay Cash. This aspect is perhaps just as important as all of the announcements that took place today, over the arc of the next 10 years.
Specimen of Apple Card private Siri AI generated statement.
Everything you buy using Apple Card is in an AI produced category presented as a color. The same colors show up in your spend summaries on your online, in-wallet statements. See orange, that’s Food and Drinks. See pink, that’s Entertainment.
At a glance you will see what you have spent your money on in far better detail than any accounting software to date. This is achieved through a combination of deeper merchant information achieved by being the card issuer and though unique use of Siri AI to categorize and create a taxonomy of your spending habits in a way that is useful.
Specimen of Apple Card private Siri AI generated detail statement with map of merchant location.
Apple Privacy vs. “You” As The Product
Apple is leading also with privacy on Apple Card. They present clearly that your payment history will not be shared with any marketing partners. This is quite unique and as simple as it sounds, it will become more and more important to consumers as the end of this decade plays out.
Privacy as a leading selling feature for Apple will be infused into just about everything Apple does from this point on. From the secure enclave to differential AI privacy, Apple has planted a flag in this new territory. This is in the exact opposite direction of Google and Facebook. This will be the battle of the next decade and there is no doubt that privacy will win the day.
Additionally like all Apple Pay based transactions Apple Card generates a one time use virtual number every time you pay online for extra security and some privacy. This takes place even if Apple Pay Online is not used. Apple Keychains will autocomplete a new virtual Apple Card number in real-time.
The Apple Card Pardox- Phsyical Card Better Than Virtual Card?
The physical Apple Card is a brilliant and sublime design that many will overlook as being “just a plain card”. I will go as far as to state that the new laser engraved titanium Apple Card, with just your name will become the new “white headphone cords” of this epoch. It is genius brand signaling that will in and of itself drive use of the card. Paradoxically the simple payment card may signal this more profoundly then Apple Pay on the iPhone itself. This effect is powerful and brand signaling has been a foundation to not only the iPod, iPhone, MacBook but also AirPods. I wrote about the AirPods brand signaling the day they were announced . I said:
“Apple will continue the tradition of brand signaling with AirPods to a great effect. They will transmit a brand commitment and potentially a lifestyle choice that many associate with a notable brand. This may be one of the reason for the extension of the earbud with the white shaft. However this extension also accommodates the primary beam forming microphone”
Specimen of an Apple Card.
Specimen of the laser engraved, titanium Apple Card.
This turned out to be correct in the backdrop of “these things are ugly” by even deep Apple supporters when AirPods were announce. They went on to become one of Apple’s most successful products of the last five years. The same effect will turn out to be true for the physical Apple Card. In my view it is the most beautiful payment card ever designed. Few will see this today, but they will see it in a few years in retrospect.
Besides the very unique Apple-like appearance of the Apple Card, it also serves as a normal mag stripe and EMV card. There are no NFC chips on the card at this point for a number of reasons. One important reason is this would create a static permanent number on the card that would open you up to potential fraud. However there is little reason for an NFC chip since you have, nearly all the time you iPhone that creates a far better user experience.
Soon Apple App Store Developers Will Be Paid By Apple Pay Cash
Apple App Store developers, the ones that earned since 2008, a year when the iPhone sold a measly 10 million units of iPhone, have made a collective $120 billion in sales from the App Store, with more than a quarter of that sum coming in 2018 alone, This ultimate shift to paying developers via this payment vehicle, even if just 20% elect to get their earnings faster, perhaps weekly or even daily will make Apple Pay Cash one of the largest payment distribution systems outside of government payments for Social Secueity. It would grow the ecosystem around Apple Card and in turn produce billions of dollars in new revenue for Apple. There is no doubt we may see this developer payment option staring to be tested in 2019.
A final note about this prospect of paying developers via Apple Pay Cash cards, it has the prospect of allowing Apple to lower the 30% fee they collect from each transaction—perhaps significantly. This factor can completely shift the model of the App Store and create a complex problem for some Android App stores.
Apple Card Signals Apple In Crypto
Of all the aspects announced today on Apple Card, it is the creation of “new money” in Apple Pay Cash cards that is perhaps the most important. This will lead to Apple ultimately being involved in crypto payment systems if not Bitcoin directly. I predict we will see this in the next few years very clearly. I also assert this “new money” will form the basis of a new Apple Merchant Payment system whereby nano-transactions (below 1¢) and micro-transactions (below $1) will become not only popular, it will remake the internet and Voice First, SiriOS world into a commerce model and away from an advertising model. We can already see this in Apple News+ and Apple TV+ announced today. Apple Pay forms a tapestry around these systems as it did with Apple Music and App Store.
Apple SiriOS Voice First Platform
I feel rather strongly in the premise of a Voice First future, I call this The Last Interface . In this new Voice First world advertising as we know it is—over . We will not tolerate an ad inserted into our dialogues we most certainly will have in the next 10 years with any Voice First platform. Thus Apple Pay Cash will form a payment paradigm to compensate in nano and micro transactions to developers and partners offering “apps” and services. I call this SiriOS for Apple and there is no doubt that a complete OS for Siri is not an option, but a requirement.
Today we saw how privacy and no-advertising was a fundamental part of Apple News+ and Apple TV+ . We saw how local curation using Siri AI takes place on the device. This forms the foundation for a complete SiriOS that operates trough any content channel: Audio, Video, Text. Including:
Thus we can see just how important it is to have Siri AI and Apple Pay combined into a simple platform that can be manifested as SiriOS services package accessible via any Voice First platform, Alexa, Google or Apple. The intelligence is not the content but the AI in the channel, this is the fundamental reason for a deviceless SiriOS with deep context and privacy and today we have a hint of this. I predict we will see more by the Apple World Wide Developer Conference (WWDC) in 2019.
Apple Card As An Engineered Experience
Apple can do all of this in credit card because credit cards are not the central business of Apple. The central business of Apple is the Apple engineered experience. Like all things Apple, they do not need to invent new things necessarily, no, Apple just needs to reinvent the experience.
Today Apple has done more than introduce a new payment card. Apple has reengineered everything we have come to know about the entire experience. From the simple elegance of the laser engraved titanium card to the brilliant use of Siri AI, Apple has once again reinvented an entire industry curated to the most important and simple elements. Apple has made a complete payment system that is worthy of the brand name. It truly is an Apple Card.