Apple Bank: Ten years on, the idea seems a lot less out-there

May 2, 2023

7 min read

Apple Bank concept | Modern building shown

It’s almost a decade since I first suggested that we might one day see an Apple Bank. Given that not even Apple Pay existed back then, I’ll be the first to admit that it seemed a pretty out-there idea at the time.

By 2015, it seemed significantly less of a stretch, and yesterday’s billion dollar news brought us even closer …

I can’t take much credit for the 2013 piece, given that it was 1st American Card Service’s CEO who alerted me to the Secure Enclave tech behind Touch ID being tailor-made for a secure payment service.

Brian Roemmele, CEO of 1st American Card Service, said that Apple’s attempt to solve the problem of how to develop a truly secure access system goes all the way back to a patent application in 2008, but it was only through the A7 chip – specifically created by ARM with mobile payment security in mind – that the company finally had a gold-standard solution. And its applications will go far beyond iPhone unlock and iTunes purchases.

“There are dozens of applications and use cases on the roadmap,” he wrote, “and I am certain a developer economy will build around this amazing technology. One that is very clear is retail payments and Apple will have quite a number of unique ways they will solve real problems for merchants and iPhone users. I can say this aspect of Touch ID will be more magical then what we have seen thus far.”

I simply extrapolated from there.

Since then, of course, Apple has made quite a few moves in this direction.

Apple Pay

Launched a year later, in 2014, Apple Pay immediately became the leader in the mobile wallet space, with more than a million cards added in the first few days. Its main competitor, CurrentC, closed its doors just two years later. By 2020, Apple Pay was accounting for 5% of the world’s card payments.

Once Apple Pay launched, it seemed to me that things were unlikely to end there, and the iPhone maker would move further and further into the financial world. I listed seven reasons why I thought Apple might become a bank – even if I was optimistic on timing.

Apple Cash

Some commenters responding to my 2015 piece thought that Apple might make an initial move into banking via peer-to-peer payments, and that did indeed happen with the launch of Apple Cash (originally Apple Pay Cash) in 2017.

Apple quickly started successfully competing with the established players – Square, Venmo, and PayPal.

Apple Card

2019 saw the launch of the Apple Card. Other cards offered better cashback deals, but it still proved incredibly popular thanks to Apple branding, the world’s simplest and fastest sign-up process, and great account management through the Wallet app.

By early 2022, with the card still only available in the US, the Apple Card hit almost 7M users. One report suggested that 60% of cardholders use it as their primary card.

2023 saw two further financial product launches …

Apple Pay Later

First announced last year, and set to launch later in 2022, the Apple Pay Later service was delayed until this year. It began a gradual rollout a little over a month ago.

As with the Apple Card, Apple Pay Later didn’t offer the best short-term financing option out there, but again brand-name, painless sign-up, and instant access made it appealing.

Apple Card Savings Account

Launched last month, the Apple Card Savings Account offers 4.15% interest, compounded daily – an attractive rate for an instant-access account. But again, the branding and ease of account opening plays a significant role in take-up.

Which was … significant! It reportedly attracted deposits of $400M on its first day, and had hit almost a billion dollars just three days later.

Apple now has some banking licenses

With Apple Pay, Apple Card, and the Apple Card Savings Account, the Cupertino company partnered with existing banks and finance companies. Apple was essentially the brand for services actually offered by other companies.

There were many who thought this would always be Apple’s model – use its branding and ecosystem to acquire customers, take a cut from its partners, while avoiding the need for any kind of banking or credit license. Plenty of profit, zero risk, zero legislative bureaucracy.

But Apple Pay Later took a different approach. Here, Apple created a financial subsidiary – Apple Financing LLC – and this company obtained the necessary licenses to operate some banking services directly.

Increasing focus on Services

A related development over the course of the past decade has been the growing importance of Services to Apple’s bottom-line.

Yes, Apple may be a hardware company first and foremost, but its Services are now a massive business on their own. Services brings in more revenue than each of Mac, iPad, and Wearables.

And sure, banking generally isn’t a very profitable business. But neither is the smartphone business, nor the PC business. If there’s one company which knows how to turn a profit when others can’t, it’s Apple.

Today, an Apple Bank looks much less of a stretch

Of course, back in 2015, many commenters were dismissing the idea that Apple might one day become a bank.

“The reality, of course, is that it will never happen. Apple is extremely cautious about venturing into other areas. I would think that Apple buying Tesla is 50 times more probable than Apple becoming a bank.”

“I don’t see it happening. The level of government scrutiny and regulation that goes with banking isn’t on line wth Apple’s MO. Apple enjoys innovation and free thinking which is difficult to do is such a regulated industry.”

“All your arguments are rock solid but there’s one big reason why this will never happen: Apple isn’t interested in becoming a bank. Apple has become really successful because of one thing only: razor sharp focus.”

Still, even then, some 41% of you agreed that Apple would at some point become a bank, with only 30% dismissing the idea.

It’s now clear that Apple wants to move cautiously, step by step, product by product, so my five-year timescale was overly ambitious. But now more than ever, it does seem to me that this is the logical end-point of an ever-growing portfolio of financial products – with Apple Pay Later proving that the company is unafraid of getting involved with banking licenses and regulations.

So I stand by my view that Apple will one day become (or, better stated, include) a bank, though I do now expect the pace to be slower than I’d once imagined. I fully expect the company to follow the same strategy it does for hardware products – target premium customers, and only engage in the most profitable banking activities – but it won’t be the first full bank to do that. Becoming a bank legally doesn’t mean you have to offer all banking activities, nor offer accounts to anyone.

Oh, and as was pointed out in 2015, Apple Inc (or Apple Financing LLC) might need to come to some sort of arrangement with the New York-based Apple Bank for Savings.

What say you? I didn’t include a poll in 2013, but by 2015 the poll results were (combining ‘Within 5 years’ and ‘Later’):