The Apple Card isn't just a credit card - it's Apple's secret weapon to sell more iPhones
Dave SmithAug 21, 2019, 21:01 IST
Hollis Johnson/Business Insider
Apple's first credit card, the Apple Card, is now available for all US customers.
Some people have criticized the Apple Card for not being a more compelling credit card, citing its mediocre rewards, calling it "boring" or "not innovative" - especially compared to Apple's other products like the iPhone.
But the Apple Card isn't just a credit card; it's Apple's secret weapon to sell more iPhones amid a maturing smartphone market.
The Apple Card, Apple's first credit card and latest "new" product, is now available for all US customers as of this week.
While early adopters have praised the Apple Card's ease of use, visual feedback on spending, and emphasis on security and privacy, some believe Apple making a credit card means the company is running out of ideas, or losing its innovative edge.
To be clear: The Apple Card is extremely innovative. Apple has removed some of the biggest friction points between credit cards and customers: Signing up couldn't be easier, rewards work in a straightforward way, customer service is tops, and using it is a breeze, whether you're buying goods or paying off your bill. Plus, Apple uses machine learning to map out your purchases and visualize your transactions so you can understand how you spend your money.
The Apple Card raises the bar for how a credit card should perform, but it's much more than that: It's Apple's secret weapon to sell more iPhones.
Apple has released a new iPhone every single year since 2007. But after a decade on the market, sales are finally slowing down as innovation around the smartphone has matured.
From around 2015 to 2017, the iPhone was responsible for nearly 70% (!) of Apple's total worldwide revenue.
As of July 30, though, the iPhone only accounted for about 48% of sales during the most recent quarter.
Over the most recent (and crucial) holiday quarter, smartphone sales slowed down for almost every single phone maker. Apple saw its biggest drop in iPhone sales in almost three years during that time.
Smartphone sales are declining globally, but the iPhone is still a huge part of Apple's business. It currently makes up about half of the company's overall revenue.
So, Apple needs new ways to attract people to iPhones to offset slowing sales. That's where services come in.
For years, Apple looked to the App Store and iTunes Store as sources of revenue, but also as a way to sell iPhones.
Apple now sells subscriptions for services like Apple Music and Apple News Plus.
Starting this fall, it will also have Apple Arcade and Apple TV Plus, two new premium services for video games and original programming.
The Apple Card, which is now available to all of Apple's US customers, may look like a standalone product, but it's really a system designed to further lock you into the iPhone ecosystem — because it's completely reliant on the iPhone to work.
Your iPhone is how you pay off your Apple Card. It's how you track your spending. It's where your card is stored — so if you lose your iPhone, you can't pay off your Apple Card bills.
The Apple Card's rewards are also tied to the iPhone. Your Daily Cash, which you get for spending with Apple Card, goes directly into your virtual Apple Cash card, which also lives in your iPhone's Wallet app.
Plus, you get more Daily Cash back if you use the card to buy Apple stuff, which is an extra incentive to keep buying into Apple's ecosystem.
In short, the Apple Card, with its beautiful interface and sexy titanium build for the card itself, is designed to entice you enough to switch to an iPhone, or keep you in iPhoneland.
Apple is said to be quietly working on more exciting projects that could be as impactful as the iPhone, like its self-driving car project or its smartglasses, which are expected to arrive next year. But in the meantime, it needs to sell more iPhones.
Like most Apple products, I expect the Apple Card experience to be significantly improved by its third or fourth iteration. But don't think it's just a credit card, because it's not; it's an incentive to buy an iPhone.