When Apple launched its Apple Card credit card in 2019, it was touted as a gamechanger, with the usual levels of simplicity and transparency that users expect from Apple products.
Apple Card: An important lesson in Issuing
Behind the scenes though, the card’s rapid growth and the new platform built by Goldman Sachs created difficulties, resulting in failures more reminiscent of a traditional issuer than a customer-first disruptor.
Goldman struggled to handle a bigger-than-expected influx of chargebacks – when a customer seeks a refund for a product or service billed on their card for any of a number of reasons.
The disputes, which put banks in the middle of disagreements between customers and merchants, have surged during the pandemic.
When an Apple Card user disputes a transaction, Goldman has to seek a resolution within regulatory timelines, and it sometimes failed at that. Customers were sometimes given conflicting information or had long wait times.
Goldman got more disputes than it counted on, said a CNBC source. “You have these queues that you need to clear out within a certain amount of time. The business was getting so big, suddenly we had to create more automation to deal with it.”
Goldman Sachs Problems
Problems at Goldman’s card business burst into public view Aug. 4, when bank disclosed a Consumer Financial Protection Bureau probe over a range of billing and service issues.
Goldman made no mention of Apple in the filing, but most of its $11.84 billion in card loans to date are from the Apple Card; the bank launched a GM-branded card in January.
The regulator is looking into Goldman’s customer dealings, “including with respect to the application of refunds, crediting of nonconforming payments, billing error resolution, advertisements, and reporting to credit bureaus,” the bank said.
Regulators are focused on customer complaints from the past few years, and the biggest source of those came from attempted chargebacks.
The disputes can be thorny to resolve: Customers sometimes try to game the system by seeking refunds on legitimate purchases. In other cases, its merchants who aren’t always forthcoming. While refunds involving identify theft or items that were never received should be clear-cut, there are also more nuanced cases where customers complain that an event like a music festival didn’t live up to its billing.
In online credit-card forums, several users complained that Goldman initially refused to side with them even though they provided evidence of fraud.
“Goldman Sachs is holding me responsible for a $930 charge that was made at an Apple store with Apple Pay that I did not make,” according to one Reddit post. “Until now, I’ve never experienced less professional service from a major company, and this has been a complete nightmare.”
Edge cases
While the bank had automated ways for customers to log disputes through their iPhones, it had done less work on streamlining the resolution of such cases.
The bank hadn’t initially accounted for what insiders deemed “edge cases,” or situations that break from the norm among the vast majority of transactions.
“We were making the case that we have a seamless way to dispute transactions,” said a source. “But we got no credit for the front end, and we had some failures on the back end.”
Another part of the puzzle is that Goldman relied on three outside vendors to help service Apple Card customers. Known as business process organizations, or BPOs, the sector often struggles with high worker turnover, increasing the odds that a representative is new or not fully trained.
In February, Apple sent some card users notice giving them a chance to resubmit old disputes, according to industry publication 9to5Mac.
The email acknowledged that Apple had “identified that some customer-initiated disputes may not have been resolved correctly,” according to the report.
Growing pains
There are also plenty of customers on Reddit who say they’ve had good experiences with the Apple Card. The product won an award from J.D. Power for customer satisfaction last year.
People with knowledge of the matter referred to the bank’s issues as the growing pains of a new business that saw an unprecedented surge in customers. Apple Card users doubled to 6.4 million by May 2021 from a year earlier, according to Cornerstone Advisors. Outstanding loans by Goldman nearly doubled last year, according to the Nilson Report.
Goldman is still a relative newcomer to the US credit card industry, and the Apple Card represented its biggest step yet into the financial lives of ordinary Americans.
While the major card players rely on decades-old technology systems, the investment bank opted to build its own platform.
In response to the regulatory scrutiny, Goldman redirected resources to automate more of the chargeback process.
Meanwhile, frustrated Apple Card users in online forums said there was one sure fire way to improve Goldman’s response.
After “6 phone calls, 3 supervisors, and 4 months of waiting it was magically resolved,” one Reddit poster wrote.
“Suspiciously, it was resolved a few days after I filed a CFPB complaint stating all of my issues. If you run into the same thing, FILE A COMPLAINT with the CFPB.”
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