According to recent reports, JPMorgan Chase is reportedly in advanced discussions with Apple to take over the Apple Card programme from Goldman Sachs.
The preference for JPMorgan as the new issuer comes from Apple itself, according to Yahoo Finance. However, a definitive agreement has not yet been reached and negotiations still face some unresolved issues.
The current Apple Card programme manages approximately USD 20 billion in balances under the Goldman Sachs umbrella. Discussions between Apple and JPMorgan have been ongoing since early 2023, with other potential partners such as American Express, Capital One, and Synchrony Financial also considered over the past two years. Fintech firms and private credit providers were among those explored.
Key Challenges and Risks
The transfer poses significant challenges due to the high subprime exposure in Apple Card’s portfolio. About 34% of Goldman Sachs’ credit card balances as of March are attributed to borrowers with credit scores below 660, classified as subprime. In comparison, JPMorgan’s own subprime exposure is around 15%, and Capital One, which specializes in subprime lending, holds 31% of its balance in that category.
The relatively high delinquency rate on Goldman Sachs’ credit card accounts also adds to the complexity. As of the end of March, roughly 4% of balances were at least 30 days overdue, compared to a 3.05% average across commercial banks based on Federal Reserve data. To cover potential losses, Goldman Sachs had set aside USD 2.45 billion by the end of the first quarter, according to MSN.
The Apple Card’s revenue model also presents a challenge because it does not charge late fees, which are typical for card issuers managing higher-risk portfolios. This design has deterred some potential partners from pursuing the acquisition unless at a substantial discount.
Background Competition
A separate competition is currently unfolding behind the scenes between card networks. MSN reports that Visa offered Apple about USD 100 million to displace Mastercard as the network provider for the Apple Card, though no decision has been announced yet.
