Here's How The Apple Card Will Boost The Company's Digital Payment Strategy – The Motley Fool

At a well-announced event earlier this week, Apple (NASDAQ: AAPL) introduced an expansion of its Apple Pay program, which is already enjoying great success, with the introduction of a credit card called Apple Card. Apple has detailed a number of features designed to make the card stand out from its peers, including a simple app, no fees, a lower interest rate, a clear and compelling rewards program, and of course, a focus on confidentiality and data security. transactions.

Unlike most cards, the Apple Card has no card number, CVV security code, expiration date, or card signature, "making it safer than any other physical credit card. ", according to Apple. Users will be able to find the above information in the digital copy of the card in the Wallet app.

While this may sound like a trivial addition, the Apple card could make the already successful foray into digital payments even more successful.

Remove pain points from the client

Apple will use Machine Learning and Apple Maps to replace the names of encrypted merchants appearing on many credit card statements with names and locations that users will actually recognize. The app also provides weekly and monthly summaries of expenses organized by categories.

The rewards program is another area that Apple has sought to improve. Whenever users make a payment with Apple Pay using their iPhone or Apple Watch, they receive a 2% refund, which is 3% for purchases made directly from Apple. Apple, including Apple Store, App Store or Apple services. . All other purchases receive a 1% refund and the total refund amount is unlimited.

The Daily Cash feature allows you to accumulate rewards on a daily basis. These cash rewards are stored in an Apple Cash card in the Wallet app and can be used the same day. This allows you to spend accrued rewards on purchases, use the card balance, or be sent to friends using the Messages app.

Apple has also added tools to help users better understand the cost of interest when they do not pay their balance in full. Customers can use the application to determine the impact of a specified monthly payment on the balance and the total amount of interest paid.

The company is associated with Goldman Sachs and MasterCard, which will act as the issuing bank and global payment network provider, respectively. Apple has stated that Goldman will never sell or share any data with third parties for marketing or advertising purposes.

Apple card users will benefit from some high-end security features. The company has created a unique architecture, the secure element, which consists of a special security chip used by Apple Pay, which contains the card information. Whenever a payment is made, it creates a one-time dynamic security code that protects your card against unauthorized use. Apple also said it did not know where users were buying, what they had bought or how much they had paid. This information is all contained locally on the iPhone.

Extend from an already growing base

Apple Pay is already experiencing reasonable success and the Apple card will only expand on this. At the conference call on Apple's first quarter results, CEO Tim Cook said the digital payment method had reached more than 1.8 billion transactions during the holiday quarter, double the volume reached during the same period of the previous year. This number can only increase, because Apple Pay is currently used in 27 markets worldwide and will be available in more than 40 countries by the end of 2019. It is also about to deal more than 10 billion transactions this year.

Apple Pay is now over 70% of merchants accepted in the United States and penetration is even higher in many other countries. Apple Pay is accepted by 80% of merchants in Canada, 85% in the United Kingdom and 99% in Australia. The number of new countries this year alone will increase the use of Apple Pay.

This gives Apple a solid foundation to launch the Apple card. The company will earn interest on the balances, as well as interchange fees or "levy" from merchants. In addition, the costs that Apple offers to offer the credit card will likely be lower than those of similar merchants.

The use of the function Cards and recognizable merchant names, as well as the ability to send questions directly to Apple, can reduce the number of customer-service interactions, which can reduce the costs. Finally, Apple will not have the usual marketing spend to attract customers through its offering because the company has nearly one billion iPhone users as the existing market for the card.

The Apple card does not necessarily have to change the game to be a big hit for the iPhone maker. This is a good start.