'Created by Apple, Not a Bank'

I’m sure most of our readers are aware by this point that Apple announced its new Apple Card – a credit card, not as we’ve known it before, that’ll be launching this summer. And that headline at the top of this column is word-for-word how Apple announced the new credit card: “A new kind of credit card. Created by Apple, not a bank.” Ooof … that got my attention.

While we knew some kind of partnership with Goldman Sachs was in the works, we didn’t understand just how significant the partnership would be at this point.

I didn’t care so much about the rewards aspect of this new Apple Card: 3% back on everything you buy from Apple, 2% back every time you buy something using Apple Pay and 1% back on those purchases where you can’t use Apple Pay. And then there’s the whole Daily Cash element on every purchase – but I’ll get into that some other time. I will point out that the no fees thing is intriguing. Apple stated that there will be no late fees, international fees, overdraft fees or cash advance fees with this card.

But what really struck me as a true evolutionary step forward were the security features they apparently thought through.

According to Apple, when you do “get your Apple Card, a unique device number is created on your iPhone. Then it’s locked away in the Secure Element.” If you can get past the spooky-sounding “Secure Element” thing, what they’re saying is that you’ll have a card number inside your iPhone that Apple cannot see. Then, each time you make a purchase, a new security code is created to go with that purchase, and you continue using your face or other biometrics to finalize that purchase.

The purchase is recorded, along with the location and item category, directly into your iPhone. According to the demonstration, those locations and categories of your purchases are translated into a Mint-looking chart to show you when, where and what you’re spending your money on. Because, as an Apple spokesperson said, “We want to improve our financial health.” After doing a quick Google search, I found 11 credit unions with that kind of phrase as part of their main branding. Just putting that out there for you.

To be clear, all of this Apple Card business hinges on us using Apple Pay. At last look, roughly 20-25% of companies and retailers use it. This move by Apple will of course prompt/bully/encourage more businesses to be Apple Pay-friendly.

But, what if you go out for drinks and the bar doesn’t use Apple Pay? Apple does send you an actual credit card, without the credit card number, magstripe, signature or CVV. All it will have is your name, an EMV chip and a simple Apple logo in the corner. If you need the number and other information, you’ll have to open the Apple Wallet to get the details to make the purchase. A hassle? Probably. A chance to show off your titanium Apple Card? Absolutely.

The thing is, even if the card is lost, stolen or coveted a little too much, or if you need to change your address, you can directly contact Apple Card customer service using iMessage. Yes, the customer service is already built into your phone.

Apple itself, according to information released so far, will not know your account number or any details of your purchases. All of that is stored on your iPhone.

Now, the big weak link for me personally is that Goldman Sachs will have at least some of the data, but has promised not to share any of it with third parties.

A reminder: This is the same company that is credited with causing the Great Recession, and two years ago, the company admitted that it misled investors about mortgage-backed securities, which helped create that lovely time of economic collapse. Disclosure: I haven’t financially recovered from that time. Is this something I can get past in order to apply for the Apple Card? I don’t know yet.

I know. I know. Target’s REDcard dropped the magstripe and signature not too long ago. But, it appears that move came directly after that disastrous credit card data breach. Disclosure: My information was snagged in that breach. We haven’t heard any news about credit card breaches from Target lately, have we?

From that catastrophe – which never brought me back to Target except to get an emergency spatula that I paid for with cash – did Apple find a roadmap to what appears to be an insanely secure and consumer-friendly credit card experience? I don’t know and I really don’t care.

To me, the levels of security, and deletion of the magstripe from the physical card and all of the other security layers, is a colossal “screw you!” to regulators and financial industry giants who cannot seem to 1) make a decision about credit card data security and/or 2) cannot seem to stop meeting with lobbyists who have a financial stake in keeping the magstripe and other outdated credit card practices alive.

For those moves, I can respect what Apple has done. We still don’t know the fine print details of the Apple Card, such as: What are the credit limits? Who can qualify? Can you transfer balances? Whatever the answers are really don’t matter anymore because Apple has planted its first titanium foot into our financial territory.

One last unrelated note: I recently convinced my cousin and his wife to join a credit union. They went to this unnamed credit union to join and were told, “We will get back to you in three to five days to confirm your membership.” They waited as long as they could and the credit union never got back to them. Instead, they went to Rocket Mortgage and are now buying their first home.

Michael Ogden is editor-in-chief for CU Times. He can be reached at mogden@cutimes.com.