The First Bite Of The Apple

It was always rumoured the Apple Logo - featuring what was long assumed to be a Macintosh Apple with a bite out of it, was in tribute to Alan Turing - the brilliant english mathematician and computer scientist who committed suicide by eating an apple loaded with cyanide.

The rumour isn't true, but it seems other long held rumours are true - Apple is entering banking and eventually perhaps financial services.

Four years after launching the AppleCard, and ApplePay, the tech giant has abandoned all pretences about not being serious about finance and in the past three weeks made its intentions clear.

In conjunction with Goldman Sachs, the iPhone maker has shown it is increasingly comfortable in both the tech space and the finance space, launching Apple Pay Later – its buy now pay later service and Savings a high yield savings account.

 Apple Pay Later is essentially Apple lending to customers from its own trillion dollar balance sheet using its existing legendary customer service network and Savings is essentially a JV with Goldman Sachs – which has both a banking licence and holds US Government backed insurance and will use a 4.15% return on its deposits to attract customers - which it is worth noting is almost four times the average savings bank deposit rate in the USA.

The big question for people in financial services isn’t so much “is that interesting?” but “where will they go next?” because Apple, with 1.6bn phone users and a US$2.6 trillion in market cap has better asst banking, better capital reserves and better customer service than all the banks its competing against.

If you are interested in the best customer outcomes, then we ought to be genuinely excited that Apple is entering into finance and thinking about expanding into investments, advice and even superannuation.

It's no secret that Apple has been diversifying its offer and reach with new revenue streams from music to data management and this looks like the beginning of a new strategy to leverage a highly satisfied user base a market dominant brand and a massive capital pool into a largely dissatisfied direct savings and payments market.

It's also worth noting that Apple absolutely has the scale to make this work – the App Store last year alone created $60 billion in profit, 10 times as much as the CBA and it is only the companies fifth biggest revenue stream as well as the worlds best at customer experience and usability..

So here’s the challenge – will Apple take its capital, world leading customer service and usability into the truly lucrative areas of the finance industry – where it can use its digital skills to out compete – insurance, pensions and investment management and if it does can the banks and insurance companies that struggle in these areas really hope to compete.

Have a look at what they are forecasting below and decide for yourself is that all from growth or line extension as well?