Goldman Sachs Spent $300 Million Developing the New Apple Card. Then Apple Claimed They Built It.

Steve Jobs had a vision for Apple to offer a credit card. He was a proponent of a closed ecosystem, so you’d earn points for Apple products, not cash back. The currency was going to be called iPoints, and since music redemptions would be a key feature (“with the Apple Card, every purchase counts towards free music”) they had mocked up several tag lines:

  • Buy bed, get R.E.M.
  • Buy balloons, get Zeppelin.
  • Buy lipstick, get Kiss.
  • Buy raincoat, get Weather Report.
  • Buy airplane ticket, get Train.

Apple Music is replacing iTunes, and while the Jobs’ 2004 vision for the card never came to fruition the company jumped partners from Barclays to launch a product with Goldman Sachs.

While the card offers largely unimpressive cash back – they’ve even already had the need to improve it – it’s innovative in other ways.

The Wall Street Journal revealed this weekend that though Apple claimed to have designed the card that isn’t actually accurate,

Thousands of engineers across Goldman were diverted to finish it in time for an August debut, delaying other projects. Apple ads for the card carried the phrase: “Designed by Apple, not a bank”—a line that didn’t appear in a giant banner ad in Goldman’s lobby this fall.

…When Apple unveiled the credit card on stage in March in Cupertino, Calif., it did so with a zinger: “Designed by Apple, not a bank.” Mr. Solomon and other Goldman executives watched from the audience. The same line was repeated in ads that Apple ran promoting the card.

Developing the Apple Card turned out to be a huge drain on Goldman‘s IT resources: Goldman Sachs spent $300 million “to build it” and “[w]hen early testing of the software this spring revealed a security vulnerability, Goldman reassigned thousands of engineers from around the firm to patch it, people familiar with the matter said.”

Apple, though, did design the monthly statements:

Apple wanted control over the monthly statements sent to cardholders, pushing for jargon-free disclosures and its own signature font. Goldman’s lawyers warned that veering from standard industry language could invite regulatory problems, but the bank compromised. Apple got its font and Goldman trimmed the fine print.

Goldman Sachs is likely to lose money on the product, since “no fees of any kind, software that actively encourages users to avoid debt or pay it down quickly, and potentially lower interest rates” hamstring the card’s revenue potential for its issuer. Goldman isn’t allowed to market customer data, either.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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  1. “Goldman reassigned thousands of engineers from around the firm to patch it, people familiar with the matter said”

    Sounds like a lot of BS. Thousands of engineers to patch a security thing? I don’t believe that is remotely true. They must be pretty crappy engineers if it took that many.

    I’ve worked on some complex engineering tasks and never anything remotely close to thousands.

  2. Of course apple wants you to think this is some bespoke new platform. It’s just a white label for a white card.

  3. I would not believe anything Apple or Goldman Sachs states! They have both proven to be big corporate liars!

  4. “1,000’s of engineers” means that a lot of people had to verify transactions were accurate following a correction in the security flaw. Most of these people would have had minimal involvement, only verifying what that the code changed by the core group did not unexpectedly affect the parts they are responsible for.
    As for the $300 million number, the amount of business Apple does with investment bankers may make that fee negligible.
    If another flaw is uncovered that leaves Apple customers with fraudulent charges, Morgan & Morgan will figure out who designed the new card.

  5. Reminds me of the story of how Seagate spent millions developing a hard drive for the Ipod only to have Jobs dump it at the last minute in favor of flash memory.

  6. $300M is a drop in the bucket for what is essentially a customer acquisition play for a mass market consumer banking product with a large addressable market with recurring and consistent fee revenue.

    People at Goldman were intellectually and politically the smartest people I’ve met in my career, so I wouldn’t be surprised they conducted deep diligence and stress-tested every possible outcome internally. Oh, and they probably spent a few million to buy insurance at McKinsey to cover their bases, too.

  7. Apple is a truly repulsive company. Loves to promote itself as warm, fuzzy, hip etc, but the reality it’s just another sleazy, predatory mob of con artists, looking to ripoff consumers for all they’re worth. So probably quite similar to Goldman in that regard.
    I buy Chinese: there’s no mega BS and what you see is what you get.

  8. @rich – 1000s of engineers basically means that they’ve offshored the work. Why do the work in the US with 5 engineers at $200/hour, when you can get a bargain at $50/hour or less in India (but masses of asses behind that code). And yes, crappy engineers is an understatement.

  9. The card is beautiful, regardless of who designed it. Really the physical Card is unnecessary. Everything is in the iPhone wallet. I wish all cards apps were so simple. Maybe the rewards are dismal but the 3% daily cash back on Apple purchases makes the card worthwhile: Monthly cloud subscription, music and app subscriptions and iPhone payments. Add in the occasional Apple MacBook or iPad purchase, It all adds up.

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