Oh boy! Apple has been reported to be developing its own payment processing technology and infrastructure such as lending risk assessment, fraud analysis, credit checks, and dispute handling.
Part of this project is called “Breakout” internally, as it would see Apple moving away from the current financial systems that it uses, plus, the rumours note, it is also working on tools for calculating interest, rewards, approving transactions, reporting data to credit bureaus, increasing credit limits, and more.
At the moment, Apple works with Goldman Sachs Bank and CoreCard for the Apple Card, although it recently also purchased Credit Kudos with an eye to launching its Apple Card in the UK market.
The company offers insights and scores based on loan applications drawn from transaction and loan outcome banking data, sourced by the UK’s Open Banking framework
Apple also works with Green Dot for Apple Cash, and Citizens Bank for the iPhone Upgrade Program, but Bloomberg says Apple’s work on financial services would be aimed at future products rather than its current products.
Apple already has Apple Pay and Apple Card, plus it is developing a future subscription service for hardware and a “buy now, pay later” option for Apple Pay transactions.
The “buy now, pay later” feature, which is called “Apple Pay Later” internally, is expected to be the first product to use Apple’s new system.
There will be an option for a four-payment Apple Pay purchase called “Apple Pay in 4,” and an option for long-term payment plans through “Apple Pay Monthly Instalments.”
The Apple Pay in 4 feature could use Apple’s in-house payment processing, while the longer term financing would be handled by Goldman Sachs.
In the future, Apple could also use its new system for the hardware subscription plan that it has in the works, plus it could serve as lender for more “buy now, pay later” services.
To start with, Apple could limit risk by requiring customers to use debit cards, plus its in-house risk assessment tools could take into account Apple purchase history and factors like whether a credit card attached to the App Store has been declined to determine whether a customer can use the payment services.
According to Bloomberg, Apple has faced some “hurdles” building its financial services product, so there is a chance that it could end up delaying its plans, or could continue to work with partners, though this is a “very unlikely scenario.”
“I’ve had the Apple Card and used Apple Pay almost since they were first offered. I don’t feel that Goldman Sachs has added much to the product, and the customer service from GS has been mediocre,” commented one reader.
“Apple customer support, on the other hand, has always been excellent. I think bringing this in-house is a good move.”
Another makes a good point also: “If Apple’s current attitude towards regulators in the EU and individual EU countries is any indication, Apple is pretty unlikely to enter one of the most highly regulated sectors worldwide, banking and financial services.
The amount of secrecy and information paranoia baked into Apple’s DNA also will make an in-house bank, credit bureau, stock brokerage, money transfer service, or retail lender extremely difficult to operate anywhere other than frontier or possibly emerging markets.
So, my guess is that Apple is working to decrease its reliance on outside providers for some support tasks, such as reporting data to credit bureaus or loss prevention, but we shouldn’t hold our breath for an entirely Apple owned and operated Apple Bank.
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