Podcast Summary
Apple's push for control ends partnership with Goldman Sachs on Apple Card: Apple's goal to control marketing and branding of Apple Card led to the end of partnership with Goldman Sachs, highlighting the importance of clear communication and alignment in business relationships.
Apple's introduction of the Apple Card in 2019 was a significant move for both the tech giant and its banking partner, Goldman Sachs. Apple aimed to deepen its presence in the payment space and make Apple Pay more central to consumers' payment habits, ultimately bringing in more revenue through transaction fees. However, the partnership between Apple and Goldman Sachs was short-lived, with Apple reportedly seeking a more prominent role in the card's marketing and branding. This desire for control led to the eventual end of their partnership, illustrating the challenges of collaboration and the importance of clear communication and alignment of goals in business relationships.
Goldman Sachs partners with Apple to enter consumer business: Goldman Sachs sought to diversify revenue by partnering with Apple, challenging traditional credit card models, and attracting top partners to offer different terms.
Goldman Sachs saw an opportunity to diversify its revenue stream by entering the consumer business through a partnership with Apple, despite being a historically successful investment bank. Goldman was described as a demanding partner due to its size and influence, but this didn't deter them from challenging the traditional credit card model. They wanted to enable different terms on credit cards and attract great partners, becoming a formidable competitor to incumbents. Goldman didn't have a credit card business and wasn't concerned about Apple entering the market, as they saw it as an opportunity to help Apple break the traditional system. The Apple Card, with its sleek design and integration into Apple's Wallet app, was a hit with consumers and offered 2% cash back on Apple Pay transactions. Goldman saw the potential in consumer revenue to offset the volatility of investment banking and trading.
Concerns over unfavorable deal terms in Apple's partnership with Goldman Sachs: Business partnerships can face challenges from unfavorable terms, strained resources, and logistical issues. Careful consideration and open communication are crucial for successful collaborations.
Partnerships, even those between financial giants like Goldman Sachs and tech companies like Apple, can come with significant challenges. During the bidding process for Apple's credit card, Goldman's sources expressed concerns about the deal's economics, which they believed were unfavorable. Initially, these concerns were dismissed, but as time passed, it became clear that those sources may have been right. Apple's demands, such as assuming credit risk and handling loan losses, put a strain on Goldman. Additionally, Apple's desire for widespread approval and quick customer service caused logistical issues. This partnership illustrates the importance of carefully considering the terms of business relationships and the potential implications of each party's demands.
Goldman Sachs' Consumer Division Struggles: Goldman Sachs faced significant challenges in its consumer division, including customer service issues, regulatory scrutiny, and losses, leading the company to consider a potential breakup.
Goldman Sachs' foray into the consumer sector through its partnership with Apple and other initiatives did not yield the desired returns and instead brought about significant challenges. The Apple credit card launch led to a flood of customer service issues and regulatory scrutiny, causing concerns among executives about the direction of the consumer division. Despite these challenges, Goldman continued to expand, investing in high-interest savings accounts, personal loans, and the acquisition of GreenSky. However, these moves raised internal concerns and the company ultimately decided to review its consumer division. The review concluded that the division was not profitable and was losing billions of dollars, leading Goldman to consider a potential breakup. The turmoil in the consumer division, coupled with regulatory issues and internal angst, led Goldman to explore the possibility of offloading its Apple credit card partnership to American Express.
Apple ends partnership with Goldman Sachs in consumer business: Apple's unexpected termination of partnership with Goldman Sachs in consumer business was due to Goldman's overzealous expansion and underestimation of regulatory challenges.
Apple, feeling the power shift in its partnership with Goldman Sachs, decided to end their consumer business relationship, leaving Goldman's time in the consumer lending space in jeopardy. Goldman, eager to expand into this area, moved too quickly and underestimated the regulatory challenges, ultimately leading to this tumultuous end. The consumer division at Goldman, particularly those working on credit cards, have been experiencing a mass exodus as Apple was the crown jewel of their consumer business. This breakup, which Apple initiated, was not inevitable but rather a result of Goldman's aggressive expansion strategy and underestimation of the regulatory complexities.
