Why Europe will not be entitled to the Apple Card announced on March 25

ByZim Yang 2019-06-14 17819

At its keynote dedicated to services, Apple presented a credit card designed in partnership with Goldman Sachs. While it is promising in many respects, it is unlikely to arrive in Europe one day.

Between a digital kiosk and a video streaming service, Apple unveiled the Apple Card on Monday, a credit card that has made a lot of noise. As can be seen on Apple's YouTube, the credit card destroys other ads in terms of audience, proof of consumer interest.

It must be said that from what we have seen, the Apple Card has many advantages. Perfect integration with the iPhone Wallet application, clear expense tracking, cashback system to recover money for each transaction, minimalist design... Apple's presentation makes you dream. If Goldman Sachs, Apple's partner, suggests that the Apple Card will eventually reach the international level, it may actually be much more complicated. We will explain why.

A product tailored to the United States

The "credit card" presented by Apple has no real equivalent in Europe. Here, we prefer the "deferred debit", where we pay the amount due every month, without interest.

The US model is based on permanent debt and repayment without a fixed maturity. Thus, the owner of the Apple Card will be loaned money that he will gradually repay according to different rules. It is up to you to choose how much you want to repay, the application then calculates an interest rate (the APR, for Annual Percentage Rate).

It can also send you notifications to remind you that you owe money and that the interest rate is rising. The problem is precisely the value of this rate. Apple announces it between... 13.24% and 24.24%, which is low for the American market according to him, and which is indeed in the low range of the American standard.

But now, imagine if a French bank asked you so much! In other words, the Apple Card's business model is inapplicable in Europe, due to (or thanks to) numerous state protections. In Europe, people do not go into debt as easily as in the United States.

A cashback between 1 and 3%, impossible in Europe

This is one of the most striking features of the Apple Card, the "Daily Cash". With each payment, Apple refunds 1% of the amount if you just paid with the physical card, 2% if you paid with Apple Pay and even 3% if you just bought something from the Apple Store. It obviously makes you want to.

How does it work? Apple picks from the interchange fee, the amount that a bank recovers at each payment. It is about 2% in the United States and may increase soon.

For each transaction, 2% of what the owner of an Apple Card pays goes to Apple. Like many American banks, the brand has decided to redistribute part of it to the customer, which is what we call cashback.

In the case of a payment with the physical card, Apple makes a 1% margin. When making an Apple Pay payment, it offers interchange to the user but recovers its levy on purchases made with Apple Pay and negotiated with banks. Finally, in an Apple Store, it offers you interchange and gives you a 1% discount, a kind of loyalty reward.

The Apple Card in Europe.... in a different form

Nevertheless, the Apple Card could well land in Europe one day, provided that the current model is abandoned for something closer to European requirements.

As Goldman Sachs is not active in the European retail market, Cupertino's company would have no choice but to seek help from another bank, or even to buy one if its ambitions grow or to apply for a banking licence (a procedure that takes just under a year).

In the end, even if the French product could take over the interface and services of the American Apple Card, it would differ on many points.

Apart from the change in business model and reduced or zero cashback, Apple may have difficulty imposing its blank card without information.

Indeed, if the signature is no longer required on the back of a card today, the three-digit number and CVV are still required. To see if Apple would succeed in convincing in Europe as it did with Mastercard.

Winning European neo-banks... for the moment

The many advantages of the Apple Card make you want to? Do you dream of a free account at no cost, instant notifications, a good application, a category grouping or a metal card? It so happens that in Europe, the two largest neo-banks offer all this.

We contacted the managers of the N26 and Revolut mobile banks, who are logically following Apple's announcement very closely. The probable long-term absence of the iPhone manufacturer in Europe leaves them a magnificent boulevard. "They launch a stylish product and we are the European alternative," says Emmanuel Boulade of Revolut. The same is true for Jeremie Rosselli, from N26: "Apple is putting the spotlight on the mobile banking sector". The German neo-bank compares Apple's ad to Orange Bank, which had brought in a large number of users.

Even if this is probably a "communication speech", it is true that the absence of Apple in Europe should benefit them in the short and medium term. On social networks, many users are enthusiastic about the existence of these services. They thought Apple had just invented them.

Will the Apple Card ever arrive in Europe? In this form, it is simply impossible. Under another, why not, but Apple will have to reinvent it. In the meantime, let's hope Apple's simplification ideas inspire aging banks and further improve mobile banks. After all, Apple has always inspired an entire industry, if not the first.

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