[Tech Talk] Apple Creating Deposit Products, Could It Also Become a Bank?

Electronic Wallets, Payments, and Now Savings Products
Apple Builds Financial Service Portfolio
Strict Regulations Make Financial Industry Hard to Penetrate
Instead, Able to Utilize 'Customer Data'

Apple, the American IT company famous for the iPhone, has partnered with Goldman Sachs to launch a savings deposit product. With an annual interest rate of 4.15%, it is ten times the average interest rate of U.S. banks. Its impact has raised concerns not only among small and medium-sized banks but also large banks.

In fact, Apple has been eyeing the financial industry for over a decade. It already offers electronic payments, digital wallets, and even credit cards. So, could Apple transform into a bank? Why would Apple, already successful as an IT company, venture into finance?

Apple Holds 147 Trillion Won in Cash, Launches Savings Product

Apple Card [Image source=Yonhap News]

Apple announced its savings product on the 17th (local time). It offers a striking annual interest rate of 4.15% and up to 3% cashback when using the Apple Card. iPhone users can easily register through the Apple application (app).

Since the account launch, there has been a significant ripple effect in the U.S. financial sector. The stock prices of large banks such as State Street Bank and BNY Mellon Bank fell sharply during the New York Stock Exchange trading session. Regional small and medium-sized banks, already shaken by the Silicon Valley Bank (SVB) bank run incident, are also on alert.

If Apple intends to attract deposits that have lost their place after the banking crisis, now seems to be the perfect timing. According to foreign media reports, after the SVB bank run, nearly $60 billion (about 80 trillion won) in customer deposits flowed out from three U.S. regional financial groups.

Although Apple is not a financial institution, it has long experience in financial-related services and is a robust giant company with cash flow reaching 147 trillion won (as of last year). From the consumer's perspective, it can be a safe choice.

Apple's Ecosystem Is Large, but the Regulatory Wall for 'Financial Industry' Is High

The representative financial district of the United States, Manhattan, New York
[Image source=Yonhap News]

So, can Apple become a bank? Apple's financial services themselves have a long history. Apple's digital wallet, 'Apple Wallet,' was launched in 2012.

Since then, Apple has introduced its own electronic payment system Apple Pay, the Apple Card which supports cashback on Apple product purchases, BNPL (Buy Now, Pay Later), all of which have been well received. If the savings account can reach Apple's approximately 1.3 billion customers, Apple could quickly attract a huge amount of deposits.

However, there is a big gap between Apple providing 'financial services' and becoming a 'financial institution.' Digital financial services such as easy payments and BNPL are good markets for fintech startups, but they are not large enough for giant companies like Apple to invest in seriously.

In fact, the core of the financial business lies in deposits and loans, especially the loan business that lends to customers, which is key to profit growth. But to seriously engage in the loan business, one must obtain approval from financial authorities and establish a financial institution.

In advanced countries such as the U.S., the U.K., and Europe, retail banking license reviews require enormous time and capital. To operate a financial business globally, individual approvals must be obtained from financial authorities in each country, and it is nearly impossible for IT companies like Apple to possess all the know-how and personnel. Even in financial powerhouses like the U.S. and the U.K., most large banks have nearly 100 years of history.

'Customer Data' Is Apple's Core Competitive Edge in Financial Technology

Apple offers various financial services, including Apple Pay.
[Image source=Yonhap News]

Instead, Apple is likely aiming at the financial information business. Itai Damti, founder of the U.S. fintech company 'Unit,' recently explained the significance of Apple's savings account in a 'LinkedIn' blog.

According to Damti, instead of directly engaging in finance, Apple can expand the iOS operating system into various financial services and build the 'infrastructure' needed by other banks and insurance companies.

For example, Apple can collect consumer data from those who register Apple accounts, use Apple Wallet, and transact with Apple Pay. Based on this, it can understand the consumption patterns and preferences of over 1 billion customers. This information would be very useful to financial companies aiming to offer 'customized products' to Apple customers.

Therefore, in the future, when Apple collaborates with insurance companies, banks, and others to develop new Apple-tailored products, it will have an advantage over its partners. Just like the current savings account developed in cooperation with Goldman Sachs. This means Apple can establish itself as a 'tech company' exerting influence in the financial industry without going through the stringent reviews required for financial institutions.

This content was produced with the assistance of AI translation services.