The Disruptor of Credit Cards — Apple Credit Card.

With Apple launching their credit card, there is so much to look forward to. It is different from all the other products in the market in more ways than one. Let’s dive into why it’s disruptive and what to expect from possibly the MOST BEAUTIFUL card you may have seen by far.

Before I jump into what this card is capable of, let’s take a moment to appreciate the beauty of this product:

*Jaw Drop*

Today, I was reading Havard Business Review’s article on “What is Disruptive Innovation” and there it was argued that a disruptive innovation needs to have one of the two characteristics:

Originate in Low-end Markets: “The disruptor often aims to provide low-end consumers with a *good enough* product¹”

Originate in New-Market Footholds: “Disruptors create a market where none existed¹”

So according to the two characteristics above, Apple Credit Card is not a disruptor since neither is it targeting low-end consumers nor has it created a new market per se, the credit card market exists since 1950².

So why do I think it is a disruptor? Let’s find out:

First ever all-digital credit card: This is the first ever all-digital credit card which completely eliminates the need of having a physical credit card with you all the time. One may argue that digital wallets offer the same functionality however digital wallets and digital credit cards are not the same.

P.S: There is a very sleek laser-etched titanium card which Apple is offering right now for stores that may not be technically capable of accepting Apple credit card, however, I see the use of that waning in the future.

Digital wallets (like Paypal, Apple Pay & Amazon Pay) provide a service that allows one to store personal information and make payments digitally through a multitude of attached financial instruments (debit card/ credit card or NetBanking). However, an all-digital credit card does not facilitate payment through multiple instruments.

Source: The Verge

2. Beats the age-old way of containing information on the card: Apple is known for it’s minimalistic and sleek design. They have done it yet again, there is no cardholder related or card related information on this card. No CVV, no expiry date, no cardholder name — nothing! The beauty of it? Safari will autofill data wherever required for making purchases.

If this is not seamless, what is?

Source: The Verge

3. No fees whatsoever: There is a claim that there are no fees attached with paying late, no annual fee, no over limit fee etc. How is this possible? Apple said there are no “hidden fees” but what the economics behind such a proposition is surely hidden from the end consumer for now.

Source: Apple

4. Data Privacy: Apple as a company is known to be notoriously private and one of the biggest USPs of their credit card is privacy. Apple claims that they will have no access to the transaction data (where the purchase was made and for how much etc) and that’s what will ensure the privacy of the data. This must make you wonder, if they will not access the data, how is the beautiful transaction analytics summary curated? (refer image on the left)

The transactions analytics will be done using on-device intelligence and not on Apple’s servers.

Many other small changes have been offered which are a step in the positive direction and will help enable seamless integration:

Reduced Documentation: One doesn’t need to formally apply for a card, it can be done via your phone using your Apple ID.
No inter-platform movement for transaction monitoring: The ability to view all your purchases on a dashboard-like-screen with expenses color-coded based on category makes it easier for a lazy person to actually monitor their expenses in real time.
Daily Cash and Month-end balance payment: We all have heard of credit cards where there are cash backs which are due on so many random dates that it is difficult to track. Apple has made that easier, you get daily cash for ALL your purchases. By default, your credit card payment will also be due on the month end, which eliminates the hassle of remembering the due dates of your card payments.

While all this seems nice and rosy, the offerings do spark concerns in the finance person in me. A few of them are:

Creditworthiness assessment of cardholder & Credit Limit of the Card:

As per the Jennifer Bailey, (VP, Apple Pay) all one needs to do to get an Apple card is to sign up on their iPhones and within a few minutes, their card will be activated. This leaves me puzzled about how is Apple going to decide on the creditworthiness of the specific user and how will the credit limit on such a card be decided?

2. Increased risk in potential loss of iPhone/ theft of iPhone scenarios:

With so much information packed in your iPhone, the risk of a financial fraud associated with scenarios where a person may lose his/ her iPhone may increase substantially. The only hurdle for the thieves will be to unlock the phone and then they could shop till they drop. Apple claims that they will send transaction alerts for approval to you on your iPhone before every purchase, however, this is a futile exercise when the device is in wrong hands.

3. Data privacy:

While Apple may claim that they don’t have access to the transaction data, the data still is being shared with Goldman Sachs.

Overall, I am a fan of this card and would love to use it as soon as it launches in the US. Also, it will be interesting to see how usage of this card will increase the adoption rate of Apple Pay in the United States.

What is your take on the card? Let me know in the comments below.

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