Hollis Johnson/Business Insider
- Apple and Goldman Sachs are being picky about who they approve for Apple Card, the new credit card they launched in August.
- “The approval rates early on have been lower,” Goldman CEO David Solomon said on the bank’s third-quarter earnings call, adding that the bank is favoring applicants with excellent credit scores.
- “Keeping approval rates low suggests that at least initially Apple wants to focus on low-risk (higher credit score) customers, rather than catering to higher-risk customers,” a Wharton associate professor told Markets Insider.
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“The approval rates early on have been lower,” Goldman CEO David Solomon said on the bank’s third-quarter earnings call. “That’s a decision Goldman Sachs is making as the bank, but we’re doing that in concert with Apple.”
The pair are “skewing to the highest side of the FICO bands,” Solomon continued, meaning they’re mostly approving applicants with excellent credit scores.
“We are quite vigilant” about “not being negatively selected out of the box,” he added. “Over time, we’ll start to see better credits appear, the approval rates will go up.”
Strong interest in Apple Card has allowed Apple and Goldman to be discerning in their choice of cardholders.
“They are keeping their underwriting standards high, and are able to be picky about who to approve, because there is so much demand for the branding, convenience, and new features of the Apple Card,” Benjamin Keys, an associate professor at the University of Pennsylvania’s Wharton School, told Markets Insider.
“The usual concern for a credit card lender is that the person who really needs the credit is exactly the person who the lender doesn’t want to lend to,” Keys continued.
“Keeping approval rates low suggests that at least initially Apple wants to focus on low-risk (higher credit score) customers who will use the card transactionally and generate interchange fees, rather than catering to higher-risk customers who may be charged high interest rates but also default at an elevated rate,” he added.
The bank also conceded to Apple’s demands to scrap late fees and not sell customer data, and it agreed to use the iPhone maker’s signature font and simplify customers’ monthly statements against its lawyers’ advice, the newspaper reported.