Apple has considerably more global reach and consumer trust than most banks. Is it any wonder, then, that it is slowly but surely turning into a financial institution? Even before it co-launched, with Goldman Sachs, a market-leading savings account that pays 415 times the lowest rate at old line institutions such as Chase or Bank of America, it already had its own credit card, peer-to-peer lending capacity, Wallet app and a “buy now, pay later” service that allows customers using their digital wallets to pay off their purchases — interest free — in instalments.Meanwhile, banks last week announced a loss of $60bn in deposit outflows in the first quarter, just as Apple announced its new savings account.
One can argue about whether a marriage between Big Tech and big banks is a good thing for competition. But Apple does appear well placed to solve some of the problems that have plagued traditional banking for years. Take the BNPL programme, for example. The company actually funds the loans largely from its own balance sheet, which had a hefty $165bn in cash and marketable securities as of the first quarter of 2023, with total debt of $111bn.
This ratio sits in contrast with most banks, which do their daily business with 90 per cent or more borrowed money. Much of that debt consists of deposits and short-term loans that can be withdrawn quickly. This is exactly what we witnessed during the Silicon Valley Bank meltdown, which saw investors try to take $42bn out of the stricken lender in a single day.