Of all the announcements Apple made at its March 25 special event – and there were a lot – the one that captured my attention was the launch of the Apple Card. That’s because the Apple Card is more than a new credit card. It’s another building block of an Apple payments ecosystem.

According to Apple, the Apple Card:

  • Is built into the Apple Wallet app on iPhone.
  • Is integrated with Apple Pay. Customers use the card in stores, in apps, and online via Apple Pay.
  • Removes friction from the sign-up process.
  • Gives back a percentage of every purchase (via a feature known as Daily Cash).
  • Provides weekly and monthly earnings summaries.
  • Features a special security chip used by Apple Pay. Purchases are authorized with Face ID or Touch ID and a one-time unique security code.

More detail is available from Apple’s announcement.

Now let’s look at the big picture. In effect, Apple, is building a self-contained ecosystem built on Apple Pay. The Apple Card:

  • Makes Apple a self-contained banker. The instant message function of Apple Card can potentially eliminate wait time of calling a bank and interacting with customer service. For enterprises, this real-time chat-based experience will likely make any wait times or lags in service feel outdated.
  • Locks in customers via the iPhone, which, in effect, becomes a credit card in addition to all the other functions the iPhone currently provides — making it harder for customers to switch to a competing platform such as Android. As The Washington Post noted, “Apple’s numberless credit card will make it harder to break free of its ‘ecosystem.’”
  • Likely drives more uptake of Apple Pay. Apple Pay currently experiences a low 13-percent usage rate. As Apple Card lives inside the Wallet app, this new product will likely drive more use of the app. As use of Apple Card grows, consumers may expect that all payments, coupons and rewards cards can be found within the Wallet app.
  • Makes Apple Pay an even bigger utility than it is now. (Note that Apple also discontinued the option of using a linked credit card to make a person-to-person payment via Apple Pay Cash.)

Creating a card elevates Apple Pay to “super app” status, an approach we’ve seen Alibaba employ with Alipay. As I wrote last year, Alibaba turned Alipay into a powerful global payments system by building a self-contained ecosystem of services built on top of Alipay. Doing so has also made Alibaba a stronger competitor against super apps such as WeChat. Apple has positioned Apple Pay as a payments super app, which makes Apple compete more effectively with the likes of Amazon, Costco, and Walmart, which offer their own cards. Here’s how the Street describes the news:

The branded credit card space is pretty competitive — retailers such as Amazon, Walmart (WMT – Get Report) and Costco (COST – Get Report) have popular offerings, as do major airlines and others. But between its attempts to differentiate Apple Card and its ability to promote the Card to its large iPhone installed base in the U.S. (and perhaps in time, elsewhere), the Card is likely to see some success.

It’s Apple Pay inside the iPhone that makes all the difference for retailers playing ball with Apple.

Mike Edmonds

Mike Edmonds

Managing Director, VP Product