Goldman Sachs filed a document with the government for its “Platform Solutions” group of businesses, which includes Apple Card. Since 2020, Goldman’s consumer products are on track to lose $4 billion, with Apple Card being responsible for more than $1 billion of that.
Bloomberg says that the latest performance details from Goldman’s Platform Solutions division are not good. In the first nine months of 2022, businesses like Apple Card lost more than $1.2 billion before taxes.
From the beginning of 2020 to the end of September 2022, these losses were worth $3 billion. But when Q4 results for 2022 are added soon, the number is expected to be close to $4 billion.
Apple Card came out in the US in August 2019, but it’s not clear how much of the $4 billion in losses are due to it. But people who know a lot about the situation think that Apple Card caused most of the $1 billion loss in 2021. And another $2 billion in losses are expected in 2022, most of which are likely to come from Apple Card and GreenSky, another Goldman lending platform.
Taking all of that into account, plus the fact that nobody knows how much money Apple Card will lose in 2019 and 2020, it looks like Goldman has spent between $1 billion and $3 billion on the consumer credit card. Loan-loss provisions are said to be the main cause of the losses. This is when a bank sets aside money as an expense for future loans it thinks won’t be paid back.
Before, Goldman thought that the Platform Solutions division would be profitable by 2022. Now, the company thinks that it will be profitable by 2025. Sources say that transaction banking is likely the only part of the Platform Solutions division that makes money.
What 9to5Mac Says
When people talk about Apple Card, the most common question I hear is, “Why haven’t they launched it in any other countries?!
Seeing how hard it is to make money with a credit card could explain why Apple hasn’t made the product bigger in more than three years since it came out. It would be hard to get Goldman to invest more to grow or for Apple to work with another bank in different countries if the break-even point took six years or even longer.
There is a lot of competition in the credit card market. Even though Apple has an advantage with its iPhone software integration, strong security features, and no annual fee, it isn’t very strong when it comes to incentives like its Daily Cashback program.
Apple gives 3% back on purchases made at Apple and a few other stores, and 2% back on purchases made with Apple Pay. However, most purchases only earn 1% back. It’s hard to do that when other cards offer 5% back at popular stores where people shop often, among other benefits.