Apple Card is a drag on Goldman Sachs, says CEO

At Davos, Goldman Sachs CEO David Solomon said his bank was too ambitious launching consumer credit, after it posted a big loss in the division mostly due to Apple Card in 2022.

Goldman Sachs spent a lot of money to help launch Apple Card and its other consumer services. A report from January 13 revealed the bank's consumer credit division lost $1.2 billion in nine months last year, and the losses were primarily related to the Apple Card.

"In the consumer platforms, we did some things right. We didn't execute on some others," Solomon told CNBC on Wednesday. "We probably took on more than we should have, you know, too much, too quickly."

Goldman helped launch the Apple Card in 2019 and reportedly spent roughly $350 to acquire every new Apple Card customer. And in 2022, it scaled back its efforts to turn its consumer savings business, Marcus, into a fully-fledged digital bank.

Executives of Goldman's collection of businesses known as Platform Solutions believe its consumer division may break even in 2025, although that target was initially by the end of 2022. However, the bank isn't giving up on the Apple Card.

"I think we now have a very good deposits business," Solomon said. "We're working on our cards platform, and I think the partnership with Apple is going to pay meaningful dividends for the firm."

16 Comments

mystigo 183 comments · 16 Years

About 1 year ago

Losing money on a credit card is not dissimilar to losing money running a casino.
They may only get 1 or 2% of every purchase card holders makes, but that quickly mounts up.
Unfortunately this may result in higher fees and less rewards.

eightzero 3145 comments · 14 Years

First: boo hoo hoo for GS.

Second: how does a credit card actually lose money for the issuer? I get that some people simply welch, and that the card issuer offers incentives in cash back, but AC is no different that any other card in this regard. GS gets the usual swipe fees, and I'm guessing AAPL gets a cut. The article cites a $350 cost for each customer, but wgi did they pay that to? AAPL? Or is this some sort of aggregate overhead cost cited to bring out the pity party for GS "losses?"

Third: boo hoo hoo for any credit card company.

mike1 3431 comments · 10 Years

eightzero said:

First: boo hoo hoo for GS.

Second: how does a credit card actually lose money for the issuer? I get that some people simply welch, and that the card issuer offers incentives in cash back, but AC is no different that any other card in this regard. GS gets the usual swipe fees, and I'm guessing AAPL gets a cut. The article cites a $350 cost for each customer, but wgi did they pay that to? AAPL? Or is this some sort of aggregate overhead cost cited to bring out the pity party for GS "losses?"

Third: boo hoo hoo for any credit card company.

Actually, part of the issue might be having customers that are too good. They pay their bills in full each month and therefore never pay interest or late fees. The swipe income is but a portion of the credit card business.

neverindoubt 120 comments · 16 Years

eightzero said:

First: boo hoo hoo for GS.

Second: how does a credit card actually lose money for the issuer? I get that some people simply welch, and that the card issuer offers incentives in cash back, but AC is no different that any other card in this regard. GS gets the usual swipe fees, and I'm guessing AAPL gets a cut. The article cites a $350 cost for each customer, but wgi did they pay that to? AAPL? Or is this some sort of aggregate overhead cost cited to bring out the pity party for GS "losses?"

Third: boo hoo hoo for any credit card company.

In case you weren’t being performatively clueless, the $350 cost to acquire a customer would have been paid out in advertising expense (TV, print, Google) and promotional expense (sign up bonus, referral bonus). In other media accounts it’s being held out as atypically high but ¯\_(ツ)_/¯.

Once you have a credit card customer, it’s hard to lose money on them individually, but your business can definitely lose money overall if the customers cost too much to acquire.

lkrupp 10521 comments · 19 Years

mike1 said:

eightzero said:

First: boo hoo hoo for GS.

Second: how does a credit card actually lose money for the issuer? I get that some people simply welch, and that the card issuer offers incentives in cash back, but AC is no different that any other card in this regard. GS gets the usual swipe fees, and I'm guessing AAPL gets a cut. The article cites a $350 cost for each customer, but wgi did they pay that to? AAPL? Or is this some sort of aggregate overhead cost cited to bring out the pity party for GS "losses?"

Third: boo hoo hoo for any credit card company.

Actually, part of the issue might be having customers that are too good. They pay their bills in full each month and therefore never pay interest or late fees. The swipe income is but a portion of the credit card business.

Oh, I don’t know about that. Go take a look at the Apple Card forum in the Apple Discussions website. Lots of people trying to play typical smoke and mirrors games with their credit, asking about balance transfers, asking about hardship help, wanting credit limit increases, wanting use another credit card to pay their Apple Card payment, you know, the general low-life stuff. How many get the Apple Card, buy a MacBook or iPhone 14 Pro, and then default. I understand the credit requirements are pretty liberal.