US investment bank Goldman Sachs, in its ongoing efforts to divest its challenged credit card business, may have found a potential exit strategy from its collaboration with Apple.
Sources at Bloomberg indicated that Apple, which is offering credit card and savings account services in partnership with Goldman Sachs, recently transmitted a term sheet to the financial institution.
The document is seen as an initial move toward terminating the contract, marking a potential shift in the trajectory of their collaboration. Although the process is anticipated to extend over several years, discussions remain private.
Originally slated to last for at least another five years, the partnership between Goldman Sachs and Apple has faced setbacks as the investment bank retreats from its consumer lending endeavours, citing unforeseen costs and rapid deployment as contributing factors.
Additionally, Goldman is expected to discontinue its credit card partnership with General Motors.
For Apple, the collaboration formed part of a broader strategy to expand its financial offerings and augment revenue from services amid a slowdown in hardware sales.
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Last year, 22% of Apple’s sales were derived from services, a notable increase from less than 10% a decade ago.
Despite Goldman Sachs’ potential departure, Apple asserts its commitment to the Apple Card credit card and savings account, stating it has no plans to discontinue these products, regardless of Goldman’s involvement.
Goldman Sachs has been exploring exit strategies for its credit card tie-ups throughout the year but has not officially commented on the recent developments.
The Wall Street Journal previously reported on Apple’s proposal, suggesting it could take effect within approximately 12 to 15 months.
Reports indicate that Goldman Sachs has engaged in talks with American Express regarding the takeover of the Apple credit card and related services.
However, concerns about loss rates have been raised by American Express. Synchrony Financial has also expressed interest in assuming control of the credit card program.
Despite the challenges, Apple and Goldman Sachs introduced a high-yield savings account in April, reaching $10bn in US deposits by August.
Nonetheless, user complaints regarding difficulties in withdrawing cash from the savings account surfaced, attributed by Apple CEO Tim Cook to a security system designed to prevent fraud, as revealed in a June interview.
According to research analyst GlobalData, global mobile payment transaction value is set to grow at a compound annual growth rate of 21.8% between 2021 to 2025, reaching $122.5tn by 2025.
Mobile payment volume will also grow significantly, at a compound annual growth rate of 19.9% between 2021 and 2025 reaching 2.2 billion payments by 2025.