Apple-Goldman Credit Card Poses Risks, May 'Blow Up,' Analyst Says

It would be "odd" for Apple to offer a jointly developed credit card with Goldman Sachs and not with Synchrony Financial, MoffettNathanson analyst Lisa Ellis said, since Synchrony dominates the market for co-brand offerings.

"Goldman must be offering Apple a very good deal," Ellis said by email. She added that the Goldman partnership "makes the card more risky for Apple," as it would be "Goldman's first foray into a consumer credit card." The card "could blow up on them, particularly if we head into a macroeconomic slowdown."

Ellis also said that "there's nothing about what Apple is launching that makes it look like it will be particularly successful." She noted that there are many co-brand cards, which are typically niche offerings that appeal to a particular segment of consumers, while big co-brands, like the Marriott/Starwood, Costco, and Delta airline cards, carry heavy rewards. She expected this new card may appeal to consumers who are "Apple zealots."

The card, which is set to run on Mastercard's network rails, may be "marginally positive" for Mastercard and "neutral-minus" for Visa, she said, as it poses "nothing threatening to Visa's business model, just a minor co-brand win for Mastercard."

It may be a "modest negative" for PayPal Holdings, as it's "another indication that Apple is continuing to invest in payments," and "neutral-minus" for Square, as Square is pushing into consumer financial health services as part of its Square Cash Wallet. It also may have no impact for acquirers Worldpay, First Data Corp., and Global Payments.

Ellis is keeping an eye on what "financial health" features Apple may roll out in the Apple Wallet as part of the card launch. "If those features are good, and are available across any/all cards stored in the Apple Wallet, not just the Apple co-brand, then it would make the Apple Wallet, in conjunction with Apple Pay, potentially more threatening to PayPal."

"The overall ongoing trend is that the wallets" - PayPal, Apple Wallet, and Amazon Pay - "continue to look for ways to provide 'bank-lite' services to get consumers to spend more time in their wallets, and less in their banking apps," Ellis said.

Apple shares fell about 0.6 percent in early Thursday trading, while Goldman's were down about 0.2 percent, as stocks across the board edged lower. Visa was down 0.7 percent, Mastercard fell about 1 percent, PayPal dropped 0.3 percent and Square fell about 0.6 percent.

In May, it was reported that Goldman was said to be issuing Apple's new co-brand credit card, according to a person familiar with the matter, as the investment bank deepened its push into consumer finance.

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