In its regulatory documents filed late last week, investment bank Goldman Sachs revealed that it had already lent out around $10 billion in credit to Apple's customer through its aptly named credit card service Apple Card.
Apple originally rolled out its first credit cards back in August, as part of its value-added program that makes it more convenient for customers to pay for products throughout Apple's ecosystem. The cards were relatively easy to acquire for existing Apple users, even those without any prior credit history or those with below-average credit scores.
According to Goldman Sachs, as of the end of September, it had already lent out around $10 billion in total, with current customers still having a loan balance of around $736 million.
The rapid acquisition of new credit card customers has caused some concern over possible defaults. Apple's desire to get as many iPhone users to avail of its credit card places Goldman in a very difficult position as it now had to deal with potentially risky customers.
Apple's Apple Card is issued by Goldman Sachs utilizing Mastercard's network. The card is only made available to Apple users and will exclusively only work on Apple's products and software. Although users can use the card in conjunction with Apple's Apple Pay feature to make contactless payments.
Its partnership with Apple is a very big deal for Goldman Sachs as it is essentially its first foray into the retail consumer business since it launched its Marcus brand in 2016. As it shifts its focus on Apple, Goldman Sachs has reported slower growth in its online Marcus business. The brand, which essentially offers unsecured personal loans, reported $4.8 billion in earnings in the latest quarter.
Industry experts have stated that it will still take Goldman Sachs more than four years to earn back in investments in its partnership with Apple. Only after then will the company be able to reap in profits.
The calculation was based on the assumption that the bank had spent an average of $350 to acquire each customer and an average of $5,000 being spent each year by the said customer. At an annual interest rate of 18.5 percent APR, it could still be a while until Goldman reports any profits.
Last month, Goldman Sachs' chief financial officer, Stephen Scherr, had mentioned during the company's earnings call that they do expect a decline in the percent of revenue spent on employee pay in the coming quarters. This was apparently due to the company's added spending on its tech-based ventures, including Apple Card.
