Apple Card has been hogging the limelight ever since it was announced earlier this year. Apple has partnered with Goldman Sachs and apparently, the latter has already spent big bucks for Apple Card. Typically, Goldman Sachs has shied away from consumer offerings until recently and now the company is spending a lot for the transition.
As part of its second-quarter earnings, Goldman Sachs has spent nearly $1.3 billion on its consumer savings which includes Apple Card, Marcus savings accounts and more. In 2019, the company has spent $275 million causing a drop of 0.6% on its return on equity.
Goldman Sachs chief financial officer Stephen Scherr said: “Cumulatively, we are making substantial, organic investments to build new businesses and digital platforms.” He further added that “As these businesses scale over the coming years, this drag should not only reverse but become an accretive contributor to the firm’s [return on equity].”
The earnings don’t specify exact amount Goldman Sachs has invested in Apple Card. However, it is quite likely that dipping deeper into consumer-facing businesses is costing a lot for the 150-year old financial institution. Furthermore, Scherr told analysts that investments will continue into 2010 and there will also be a “meaningful impact” created by supporting initial growth in the Apple Card.
When asked about the risks associated with consumer-facing business, Scherr replied: “There’s no denying the consumer business — whether Apple Card or Marcus — is a risk business.” He also said that “We’ll continue to look at it on a risk-adjusted return basis.”
Meanwhile, things look brighter for Apple. According to analysts, the Cupertino company is said to rake in revenue to the tunes of $1 billion within the first few years. Apple is banking on its loyalists. Apple Card is due to be released this summer and is aimed at offering higher cashback/discounts for Apple users.[via CNBC]