Why I just went from sell to strong buy on Apple and Goldman.

I have to admit that I have never really been a big fan of Tim Cook; to me he has always seemed like a rather disappointing replacement compared to Steve Jobs. However, I have to admit that he has got some serious brainpower (or at least someone in Apple does) after the launch of the Apple Card and Apple Pay system a few years ago.


Like millions of other people, I love the convenience of Apple Pay; I don't need to carry around a fat wallet filled with twenty different cards and instead can just use whichever card I want direct from my phone. The introduction of the Apple Pay system revolutionised payments from mobile devices, and has since been taken up by Android in the form of Android Pay.

What I did not know at the time of the launch of Apple Pay, was that it was actually just part of a bigger picture. I believe Apple launched Apple Pay with this credit card in mind all along - to totally revolutionise the payment system while expanding its profit margins.

Allow me to explain further; the number of businesses in the US and the UK who accept Apple Pay is around 80%, and the number of worldwide users of Apple Pay is 252 million according to Statista. Now, this has completely revolutionised the framework of making payments across the world. Fortunately for Apple, this means that the infrastructure for the Apple Card is already in place, and actually, Apple/Goldman now has a form of monopoly power over businesses and can charge whatever they want for purchases.

The Apple Card comes with such great perks that all iPhone users and Apple Pay users will immediately want to make all of their purchases on Apple Pay. The 2% cashback rivals that of the best credit card rewards and the total lack of fees is astounding. Therefore, consumers will be incredibly inclined to make managing their money easier and more flexible by taking advantage.

It is currently estimated that the value of transactions placed on mobile devices is over $50 billion in the US alone each year. It is safe to say that approximately 50% of such transactions are directly placed through iPhones.

Let's say that Apple charges businesses 3-4% on purchases made through the Apple Card, when Apple gives 2% back to consumers, they are left with a tidy 1-2% profit. Just in the US, this would be equivalent to $250 million a year right now in pure profits. This doesn't even account for the money which would be made of the interest!
But we can take this further as the Apple Card will also have a physical card to accompany it (made of titanium!) This means that users will also be using their Apple Card to make purchases online, in store with a card and in all purchases. This means that we could easily see a trillion dollars of transactions processed through the Apple Card each year in the US alone within the next 5 years.

Any maths brains already calculated the potential windfall this would mean for Apple? Well I have. When we account for the cashback rewards, the fees Apple will have to pay to Mastercard for its transaction technology and the Goldman partnership, we are looking at a comfortable $5 billion for Apple a year from the US alone.

Assuming that Apple continues to be the industry titan that it is and competition from Android does not become more rife,  we can safely assume that this number will only rise in decades to come. As the world becomes more tech savvy, it is highly likely that we see this new payment scheme being a driver of growth for Apple and Goldman.


Tim Cook, I should never have doubted you. Well done.