What we’ve been thinking: Apple’s various financial services offerings—Apple Savings, Apple Pay, Apple Pay Later, the Apple Card, and more—represent aspects of a lifestyle marketing campaign, targeting a particular customer segment, rather than the more usual product-by-product competition fintechs enter into with traditional financial institutions (FIs).
- That insight comes from Lierin Ehmke Melvin, director of insights at Mintel Comperemedia, through the Financial Brand. And it echoes findings within our recent report, “Apple in Consumer Finance: Its Three Biggest Competitive Advantages, and How Banks Can Adapt.”
Apple isn’t for everyone: It’s deliberately tailoring its financial services offerings with an eye toward appealing to affluent millennials and Gen Zers who grew up using its phone, computer, and other devices. For example, Gen Z’s preference for cash over credit is partly why Apple Card rewards are called “Daily Cash.”
- Aside from comprising the largest age group in the US, those two generations are the most open to switching banks, per Kearney, at 24% compared with 6% to 8% for Generation X and older cohorts.
- Our US Banking Digital Trust Benchmark found Gen Zers place trust in Apple for banking services on par with their primary financial institution—12.9 percentage points more than the total population does.
- While many consumers are comfortable with spreading out their deposits or using services from several different brands, Apple has the argument of seamless integration, convenience, and simplicity on its side, so it may be better able to persuade them to consolidate.
Apple is selling a lifestyle as well as services: Special features that are available for Apple devices take its easy, intuitive user experience to another level because of interaction across Apple devices. That immersive user experience can only be described as a lifestyle.
- Apple’s marketing angle is to promote the ability to pay for and finance goods and services that allow users to live that lifestyle.
- The iPhone is the focal point for the company’s credit and deposit efforts, as is the Apple ID, which provides the membership benefit of easy entrance to its “walled garden.” We forecast that 97% of Gen Z consumers will have smartphones by 2026, and 80% of those phones will be Apple iPhones.
Apple promotes privacy and security: It’s using features like facial recognition for access to Apple Pay and its efforts to provide data privacy, like its AppTrackingTransparency policy, to present itself as a challenger brand. Consumers view privacy and security as part of the product, not an extra or add-on that’s only available through a premium tier.
- That’s an area where traditional FIs still have some work to do. A recent study found that 47% of consumers are unsatisfied with their FIs’ security measures for everyday digital activities.
Apple can build on its previous innovations: Just for one example, Apple could also apply its learnings from health monitoring using the iPhone and the Apple Watch combination to its approach to financial services.
- With 70% of consumers wearing some type of health-tracking device, a tool that would offer real-time updates on financial health looks like less of a stretch. Especially because millennials and Gen Z have put financial matters at the top of the list of things that stress them out.
Yes, but: Apple isn’t used to the escalating demands of financial services regulators—and of late, they've been upping their scrutiny of the shadow banking system.
- The Office of the Comptroller of Currency is keeping a close eye on bank partnerships with tech companies, and the Consumer Financial Protection Bureau is already investigating the credit card practices of Apple’s credit card partner, Goldman Sachs.
- And in July, Apple was sued in a class-action antitrust lawsuit alleging that its monopoly on iPhone tap-to-pay allows it to charge card issuers exorbitant fees.
- Last year, European Union antitrust regulators sent Apple objections to its exclusive hold over the iPhone’s payment technology.