JPMorgan Chase & Co. is in talks to acquire Apple Inc.’s credit card system from The Goldman Sachs Groups Inc.
In November 2023, Apple canceled its partnership with Goldman Sachs concerning its credit card and savings accounts after disagreements emerged regarding how both systems were run. Apple approved nearly all applicants — even those with low credit scores — for its credit card, increasing the chances of loan defaults and driving up loan losses for Goldman Sachs.
Additionally, Apple has a calendar-based billing feature where all bills are sent to cardholders on the same day — usually at the beginning of the month — flooding Goldman Sachs’ customer service departments. Typically, banks spread out bills to avoid an influx of calls to the bank.
Goldman Sachs has been interested in canceling the partnership as the financial losses from its consumer banking business, called Marcus, amounted to $3 billion, causing the bank to step away from the division.
Following the canceled partnership, Apple had 12 to 15 months to find a new banking provider for its services, and JPMorgan and American Express became the top contenders to take over. According to The Wall Street Journal, JPMorgan is in advanced talks to take over the credit card program, with key details such as price and restructuring under discussion.
However, JPMorgan is looking to pay less than the face value of $17 billion in loans on the credit card and wants to eliminate the calendar-based billing. Face value is the stated value that a financial instrument is worth that the issuer agrees to pay back by the time of maturity.
During a credit-card partnership takeover, the selling and acquiring banks agree on a price for the existing balances. At the same time, the selling bank negotiates with the brand partner on the terms and conditions of the card. Conditionally, Goldman Sachs faced an issue with the reliability of the debts JPMorgan would collect from the acquisition.
Over a quarter of its card loans were attributed to subprime borrowers — those with a credit score below 660, meaning they’re likely to default on loans — because Apple wanted to issue cards to a broader range of consumers. JPMorgan CEO Jamie Dimon acknowledged the increasingly competitive landscape of the banking system and stated in his 2023 annual report that “non-banks [fintechs and tech companies, including Apple] are competing with traditional banks.”
The potential acquisition could signal Dimon and JPMorgan’s commitment to staying competitive among emerging industry disruptions but also pose the same risks that led to the dissolution of the Apple and Goldman Sachs partnership. “The banking system is not static: There are startups, mergers, successful upstarts and fintech banks, and even Apple, which effectively acts as a bank with success and failure simply part of the robust process,” Dimon wrote in the report. “To deal with this fluid environment, banks of all sizes develop their own strategies, whether to specialize, expand geographically, or embark on mergers and acquisitions.”
