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JPMorgan Chase nears a deal to replace Goldman Sachs on Apple Card

MacDailyNews

Jul 29

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JPMorgan Chase is in advanced negotiations to assume control of Apple’s credit-card program, sources familiar with the discussions say. Talks between the nation’s largest bank and Apple have intensified recently, with Apple indicating JPMorgan as its top choice to succeed Goldman Sachs as its card partner. The Wall Street Journal previously reported that negotiations between JPMorgan and Apple began in early 2024.
AnnaMaria Andriotis for The Wall Street Journal:
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An agreement would be one of the biggest credit-card deals ever, cementing JPMorgan’s status as the largest credit-card issuer in the U.S. It would serve to bring two of the country’s most influential companies closer together, giving the bank a loyal base of Apple customers to whom it can pitch more financial products, and giving the Apple a sprawling consumer franchise to help it sell and finance more gadgets.
The Apple card has around $20 billion in balances currently at Goldman Sachs…
Separately, there has been a battle between the networks. Visa has offered a roughly $100 million payment to Apple to try to replace Mastercard as the card’s network, the Journal reported.
Several roadblocks have kept this program from moving so far.
First and foremost is its high exposure to subprime borrowers. That is affecting the price that JPMorgan would be willing to pay Goldman to take on the balances, the people said.
As of the end of March, some 34% of Goldman’s credit-card balances are tied to people with less than a 660 credit score, on a scale that tops out at 850. At JPMorgan that figure was 15%, while at Capital One, which has for decades specialized in subprime cardholders, borrowers with a credit score of 660 or lower held 31% of balances.
Most credit-card issuers make up for having delinquent borrowers by charging late fees. But the Apple card with Goldman doesn’t charge late fees, wiping out a key revenue generator.

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MacDailyNews Take: Ay yi yi, 34% of Goldman’s credit-card users are subprime! No wonder it’s been a tough sale.

As WSJ notes, most credit-card issuers make up for having delinquent borrowers via late fees, but the Apple Card with Goldman doesn’t charge late fees, wiping out a key revenue generator.

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