Around the end of the first quarter 2019, Apple announced its second entry into the financial services space: the Apple Card.

It promoted this credit card in true Apple fashion, and the world took notice. The promotional video that accompanied both the announcement and subsequent rollout of the card later in 2019 was viewed by millions on YouTube, creating serious buzz in the financial services world.

According to the video, this groundbreaking new credit card created by Apple, not some bank, harnesses all the power and wonder of the iPhone and the world of Apple, as well as other tech partnerships. For instance, if you use your Apple Card one night while out with friends and can’t remember where you spent $47.35, the Apple Card integrates your transaction history with Google Maps so you can see where you made the purchase – “exactly where.”  

Also “differentiating” the Apple Card from the thousands of other credit cards not created by Apple, according to the video, are features like a rewards program in the form of daily cash; no fees (not even hidden ones); and its simplicity, transparency and privacy, along with other security features that don’t rely on users “remembering your mother’s maiden name.”

With a late 2019 launch, the Apple Card was poised to take over the credit card world. Or at least that’s what some believed.

As part of our fall and winter Performance Analytics workshops that year, we talked about the Apple Card and what it meant to traditional banks and credit unions. We asked workshop participants to share their thoughts, and from Los Angeles to Providence and Seattle to Tallahassee, we heard a mixed bag of reactions.

Some thought this was a watershed moment in the financial services sector, and, as Marcus Rothaar wrote shortly after Apple Card’s launch, others used words like “revolutionary.” On the other side of the spectrum, there were shoulder shrugs and indifference because, after all, “it’s just another credit card.”

Regardless of your feelings then or now, Marcus’ advice in October 2019 was, as usual, spot on. This sort of disruption in the industry is ongoing, and the pace seems to be quickening. If you are to compete and thrive in a world with the likes of Apple Card, then you need to pay attention, listen and learn from not only Apple’s mistakes but from its successes. And then, with that knowledge in hand, as Marcus suggested, disrupt yourselves.

So, with that, let’s set aside the hype and hoopla and look at the Apple Card today to see what we can learn.

Is a Strong Brand All You Need?

Let’s start with the Apple brand and targeting of the Apple Card.

No matter how you slice it, Apple is the world’s strongest brand. In its most recent list of the World’s Most Valuable Brands, Forbes ranked Apple top of the heap, estimating its brand value at a cool $241 billion. Likewise, Interbrand, a leader in brand consultancy, ranked Apple No. 1 in its 2020 study of the Best Global Brands. This ranking was not only based on value but included perception of the brand across the world and the future of the brand in the global market. Apple is the most recognized and valuable brand in the world today.

Even with that brand horsepower, Apple has only recently managed to grab the majority market share of smartphone users in the United States, edging out Android as the preferred operating system. That’s a fairly important point in this discussion because, as the name implies, the Apple Card can be applied for and used only by iPhone or iPad users. I’m sure, somewhere down the line, Apple has designs on world credit card domination, but as of today its target market is about 150 million people in the U.S.

Great card and great marketing. So where are we today?

According to an article written in March of 2020 by Ron Shelvin in Forbes.com, approximately “… 2.2 percent of all U.S. adults with a credit card … have the Apple Card.” Of those early adopters, 71 percent fall into the coveted millennial segment, while only 3 percent of those with an Apple Card are baby boomers.

A 2.2 percent share of the market isn’t much to write home about, particularly when compared to the leaders: Citi with 17 percent of the credit card market, Chase at just under 15 percent, American Express and Capital One both with 11 percent, and Bank of America claiming a healthy 10 percent, according the 2020 Nilson Report.  

Limited adoption to this point notwithstanding, based on Raddon Research Insights, it looks like the Apple Card will pick up considerable steam further down the line, particularly with the millennial crowd, who have largely indicated they are very or extremely likely to apply for and use the Apple Card at some point.

Where the Apple Card is excelling is in the sought-after top-of-wallet status. According to Ron Shelvin’s article from March 2020, 60 percent of those with an Apple Card have indicated that it is their primary credit card, trailing only Bank of America’s 61 percent and beating out the likes of Capital One and Wells Fargo.

A pretty small piece of the overall credit card pie, but those who do have the card overwhelmingly place it on the top of the stack. Why?

A Rewarding Relationship

In that rollout ad, Apple focused on the rewards associated with the card and, particularly, the immediacy of those rewards, which is a huge differentiator. This alone would probably set the Apple Card a cut above most other cards in terms of top of wallet. The simplicity of accessing and redeeming rewards is the largest factor when consumers choose which card is primary. The rewards associated with the Apple Card and the unlimited daily cash go automatically into the Apple Cash function, which then acts just like cash. Did I mention this is daily – not monthly – and automatic?

The rewards themselves are pretty run of the mill: 3 percent cash back on spending with select partners, 2 percent cash back on all other purchases made via Apple Pay and 1 percent cash back on all purchases made with the physical Apple Card.

By comparison, the Capital One Savor card offers 4 percent cash back on all dining and entertainment purchases, 2 percent at grocery stores and 1 percent on all other purchases. Nerdwallet’s highest-rated cash-back card, Chase’s Freedom Unlimited, offers 5 percent back on travel, 3 percent on drugstores, 3 percent on dining, including delivery and takeout services, and 1.5 percent on all other purchases. So, yes, the Apple Card rewards are fairly pedestrian.

Furthermore, the 3 percent cash back initially applied only to Apple products. But in the year and a half since its launch, Apple has expanded its 3 percent cash back segment, teaming up with the aforementioned “select” partners, who include the likes of Uber, Uber Eats, T-Mobile, Panera and Nike.

Unlike most providers that offer rewards based on cardholder preference, Apple is offering its highest level of cash reward based on Apple Pay use at a very small segment of retailers and providers. This tactic is aimed at attracting a younger demographic who are comfortable with the mix of technology and financial services. And with its fairly liberal underwriting, Apple is attracting those looking to establish some credit history. The approach isn't terribly unique, but when it’s coupled with one of the most loyal brand followings since the Backstreet Boys, we can start to see how the card gained so much top-of-wallet traction so quickly.

But wait, there’s more.

It’s the Experience

When you’re Apple, you understand the importance of the consumer experience – the emotional connection the consumer has with the brand and the importance of the interaction with products and services. And, if you’re Apple, you understand the experience is doubly important to the very demographic you’re targeting with your new, super cool titanium credit card. And that experience starts with the application process.

The ease of applying for an Apple Card resonates with a younger demographic who have a deep affinity for the digital channels. And while millennials have traditionally preferred to approach more complex transactions, like applying for loans, in a face-to-face setting, the pandemic and further reliance on digital pathways has changed that preference significantly.

Applying for the Apple Card can be done directly from the iPhone wallet and, some say, completed in as little as three minutes – card in hand. That’s the type of experience the millennial and Gen Z populations demand: frictionless, quick, no hassle. Apple Card checks all those boxes.

Not only is it extremely easy for iPhone users to apply for the Apple Card, the customer service is what generates such strong brand loyalty and plants the card firmly atop many wallets. Questions, issues, service problems or anything else a cardholder may need can be accessed through a direct message feature built into the iPhone wallet. Initial feedback regarding users’ experience with the Apple Card has been phenomenal.

What We Can Learn From Apple

It begins and ends with the user experience and, specifically, the digital interaction. Most credit cards compete on rate or, more likely, rewards in their attempts to gather share of wallet, attract more cardholders and retain business. Apple has approached the credit card by focusing on a best-in-class digital experience.

As the mobile device takes on more importance in the financial services world, we must empirically (not anecdotally) understand the end-to-end journey. We must constantly improve the experience and make the entire process quick, easy and frictionless. From the application to the customer service interactions, from the ease of accessing and redeeming rewards to knowing how much the cardholder spends – and when and where – the Apple Card provides users a great experience.

There are tons of bells and whistles that are pretty and shiny: great security features, built-in money management tools, no fees. But the overall experience is what matters most. Apple not only has leveraged its tremendous brand strength and loyalty, it has redefined the credit card-carrying experience.