It is said that "the end of technology companies is finance", but I did not expect that Apple also came to this day.
On April 17, 2023, Apple announced the launch of an Apple Card-based high-yield savings account with Goldman Sachs Bank with an annualized rate of up to 4.15%, and cash rewards ranging from 1% to 3% by using Apple Card purchases.
This scene is very similar to the "high yield" and "cash red envelope" used when Yuebao was promoted in China many years ago - around 2014, the annualized yield of Yuebao once hit a record of 6.65%, and rewards such as consumption cashback were widely used.
▲ (Source: Apple official website screenshot)
Given that Tim Cook had just come to China in March and visited the capital Beijing, Apple launched this business in April, and some netizens ridiculed that "Cook came to China to copy the balance treasure operation."
Behind this, what is going on in the "Apple version of Yuebao", and what kind of anxiety is hidden behind Apple?
Apple's financial ambitions
Before talking about "Apple's version of Yuebao", it is necessary to review the financial business that Apple has long been involved in, including payment, credit cards, and consumer loans.
At the fall of 2014 product launch, Apple released Apple Pay, an NFC-based mobile payment function, which was launched in China in 2016.
Launched for many years, in June 2022, US PYMNTS (well-known payment media) data showed that Apple Pay has occupied 48% of the market share of mobile wallets in the United States, but the total penetration rate is still low, accounting for only about 5.8% of in-store transactions in the second quarter.
In China, Apple Pay has no sense of existence, after all, most online shopping platforms do not support Apple Pay's payment method, offline transaction scenarios, large supermarkets may be fine, but small businesses are obviously more willing to use Alipay and WeChat that can be collected by simply printing QR codes, and Apple Pay needs to be equipped with a POS machine with UnionPay Cloud QuickPass function to use, which is expensive and complicated.
But Apple is not dead.
In 2019, Apple teamed up with Goldman Sachs again to launch the Apple Card business, which is a credit card business with Goldman Sachs as the issuing bank. Compared with traditional credit cards, the most important features of Apple Card include: no card number, no CVV (security code), no expiration date, no signature; Highly integrated with Apple's mobile wallet; You can get 1%-3% cashback on purchases (including 3% cashback on Apple Store purchases, 2% cashback on any Apple Pay purchases, and 1% cashback on physical Apple Card purchases); No annual fee and low interest.
In March, Apple launched its long-warmed Apple Pay Later, the equivalent of China's "Huabei" — users who can apply for a $50 to $1,000 Buy now pay later, or BNPL loan service, which will repay the loan in four payments over the next six weeks, with no interest and no fees, essentially with Goldman Sachs acting as the lender.
▲(Image source / Visual China)
In this context, Apple once again joined hands with Goldman Sachs to provide Apple Card users with a high-yield savings account equivalent to "balance treasure". After transferring money to this account, users can currently enjoy an annualized rate of return of up to 4.15% (equivalent to more than 10 times the national average savings rate), and future yields may change with market interest rates, as well as cash rebates ranging from 1% to 3% for spending with Apple Card.
So where does the annualized rate of return of up to 4.15% and the consumption cashback ranging from 1% to 3% come from?
In fact, against the backdrop of successive interest rate hikes in the United States, US Treasury yields of different maturities have risen sharply, including the yield on US one-year Treasury bonds at 4.77% as of April 20, 2023, compared to more than 5% in February before. So even if Goldman Sachs simply and crudely bought short-term Treasuries with money in its savings account, it would already be able to cover the current interest rate of 4.15% (as long as there is no run).
As for the 1%-3% cashback, in fact, when users use credit cards to make purchases, the card issuer, the receiving bank and the relevant payment network will get a certain percentage of the "handling fee", the total proportion is around 2.5%. Apple and Goldman Sachs are likely to return the part of the revenue they can earn to consumers as promotion expenses, and in fact do not need to pay much additional cost.
One difference is that the "Apple version of Yuebao" is essentially Goldman Sachs credit card users depositing money into a specific high-yield savings account, and the source of income is covered by Goldman Sachs' foreign investment profits; In essence, users buy different money market funds on the Alipay platform, such as Tianhong, E Fund, Huitianfu, etc., and fund managers use these money to make low-risk investments and savings such as bonds, and earn income to cover interest.
In addition, at present, only Apple Pay can be used in China, and UnionPay POS machines equipped with Cloud QuickPass function are required, and Apple Pay Later and Apple Card services are temporarily only serving the US market.
It is worth noting that Apple chose to release this new business at this time, which has a certain special background.
The US banking sector is facing a huge test against the backdrop of the Fed's sharp interest rate hikes - according to the latest data released by the Fed, US banks lost nearly $100 billion in deposits in the week ended March 15, with small banks falling by $119 billion to $5.5 trillion and large banks adding $67 billion to $10.7 trillion.
"Uneasy" money needs to find more stable shelter, and of course higher yields are better – so about $120 billion flowed into U.S. money market funds in the week ended March 15, the largest weekly net inflow since June 2020.
Apple and Goldman Sachs' move is largely to use Apple's market share of more than 50% in the United States, as well as Goldman Sachs' brand endorsement, to absorb funds "seeking asylum" in the market.
It's time for Cook to be in a hurry
Apple, which has shown its ambitions in the financial sector, is in fact suffering on many fronts.
In terms of mobile phone business, in the first quarter of 2023, Apple's worldwide smartphone sales were 57.51 million units, accounting for 21%, slightly lower than Samsung's 22%, losing the throne of the previous quarter's market share.
But in fact, Apple's market share ranking has been fluctuating, since 2019, it has only briefly held the first place in market share in the fourth quarter of each year, and most of the other times have remained in the second, and occasionally exceeded by Xiaomi from 2020 to 2021 and fell to third.
If you compare the sales results in the first quarter of recent years, Apple's pressure will be more real - in the first quarter of 2021 and the first quarter of 2022, Apple's mobile phone sales increased by 41.37% and 7.72% year-on-year, respectively, which has fallen sharply, but the year-on-year increase in the first quarter of 2023 is only 1.79%, and the absolute value is only 1 million units, showing the lack of growth.
Behind this, global smartphone shipments in 2022 fell 11.3% year-on-year to 1.21 billion units, the lowest since 2013, although Apple has risen with its high-end advantageous share, but it cannot withstand the continuous contraction of the broader market.
▲(Image source / Visual China)
It is worth noting that while the imagination of the entire mobile phone track is gradually lost, folding screen mobile phones have become a segment of the growth objective, with global shipments increasing by 62% year-on-year in 2022 and domestic growth of 154%. However, when Samsung, Huawei, Honor, Xiaomi, OPPO, vivo and other mobile phone manufacturers have launched various forms of folding screen mobile phones, Apple still holds a wait-and-see attitude and does not join this fierce battle.
In addition, Apple has missed the current hot car and AI tide.
The story of car building is needless to tell - since the establishment of the self-driving car department "Titan" in 2014, there has been continuous news in the industry that Apple's car manufacturing team has formed and scattered, scattered and grouped, and there has been no mature technology or product launch.
In the current wave of AI sweeping global technology companies, the "calm" Apple is also in a passive position.
Since the release of ChatGPT by OpenAI at the end of 2022, opening a new round of artificial intelligence "revolution", various domestic and foreign technology companies have demonstrated their AI capabilities and achievements in large language models, including Microsoft implanting GPT-4 into Office, Baidu releasing "Wen Xin Yiyan", Ali releasing "Tongyi Qianqian", SenseTime releasing "Discussion" and so on. Apple, which has temporarily "fallen behind", has become a special existence.
It should be known that Siri, which first appeared at the iPhone 4S conference in 2011, made Apple the first batch of large technology companies to release AI voice assistants. At that press conference, Siri checked the Paris time, explained the meaning of "mitosis", and listed 14 high-rated Greek restaurants at the request of the questioner.
But more than 10 years later, Siri still seems to be the same Siri. If you ask it "What is an Apple Card?" "It can only capture keywords and search on the web and push them to you in the form of a web page, far from organizing its own language and presenting the results like ChatGPT (although it often also talks nonsense seriously).
Behind this, voice assistants represented by Siri and chatbots represented by ChatGPT actually belong to different types of artificial intelligence - the former belongs to the so-called command and control system, which can only understand limited questions and requests, and the latter is driven by so-called large language models, which can recognize and generate text based on datasets after training on a large number of network datasets.
Apple is actually starting to rush. In March 2023, The New York Times reported that Apple was testing generative AI, hoping that these technologies could one day be used on Siri, Apple's virtual assistant, although there are some fundamental problems with the way Siri is designed.
A former Apple engineer who worked on the Siri project told the media that Siri is difficult to be as powerful as ChatGPT because of the clunky database design and outdated and complex code. If Siri wants to achieve the effect of ChatGPT, Apple needs to refactor from the underlying technology. Updates as simple as adding new phrases centrally can take up to six weeks to rebuild the entire Siri database, or a full year if more complex features such as search are added.
After missing the wind one after another, Apple's biggest attraction in 2023 is the MR (mixed reality) headset device that will be released at the WWDC conference in June this year, according to news, unlike the face or fingerprint unlocking used by iPhone and iPad, this headset will be unlocked by scanning the user's eyes, and the function of switching AR/VR mode with one key will also become one of the biggest highlights of this headset.
But the question is, compared with the car track and AI track, is the AR/VR track that Apple is betting on a more imaginative existence?
The performance level also began to show Apple's pressure - October to December is Apple's peak sales season, but the latest quarterly report as of the end of December 2022 shows that Apple's net revenue profit fell by 13.38% and 5.48% year-on-year, respectively, which is the second time in nearly 20 years that the net profit of the quarterly report has decreased at the same time, and the decline is much higher than the last time (2018).
At the same time, Apple's gearing ratio also hit a record high of 85.64% at the end of September 2022.
Behind this, Apple, like many mature technology companies, although there is a lot of money on the books, but a large part of it comes from overseas markets, in order to avoid paying large taxes and cannot be repatriated to the United States, and the US headquarters needs to pay a lot of cash for research and development investment, shareholder dividends, etc., so it needs to continue to borrow in the United States.
Especially when overseas business has become an increasingly important source of revenue for Apple, it is more likely to have a debt ratio "rolling higher".
In this context, how to make more money, especially in the United States, has become a problem that Apple needs to consider. From Apple Pay to Apple Pay Later, to Apple Card and now Apple Card-based "Apple version of Yuebao", mainly serving the US market, may alleviate Apple's anxiety to a certain extent.
Author | Lin Xiawei
Editor | Han Zhongqiang