The 60% GM is for the whole of Apple’s Services business. And Capex is actually failing off a little. I’m not seeing much mention of the fact that base cash back without
pay is only 1%, 2% if with AP, 3% if AP and on Apple products or services.
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Replying to @davidjrainey @suatkilicMD
2% cashback on Apple Pay is like ten times the interchange fees received. It's an expensive way of acquiring lending customers.
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Replying to @dsquareddigest
Presumably Goldman is funding a big chunk of that, otherwise Apple is getting a bad deal. 2% cash back isn’t that uncommon, there are the Citi and Fidelity cards and others. I believe analysts think the cash back+merchant/interchange part of these cards runs at a slight loss.
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Replying to @guan
I think Apple is in fact getting a bad deal; the merchant fees can't be attributed to the card as they're a cross-subsidy from the existing and successful Apple Pay.
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Replying to @dsquareddigest
This is what Visa charges US merchants, Goldman’s share is somewhat lower. There’s no way none of that goes to fund the 2% cash back.pic.twitter.com/WnBdmlsCZ8
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Replying to @guan @dsquareddigest
Right, this is a credit card, not a debit card. Interchange is not regulated by Dodd-Frank (or anyone). I asked Goldman what the interchange fees were in this thing, they didn’t tell me, but I suspect they’re the highest of any no-fee card.
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Folks, great insights here. The answer is Apple is making money. A ton of it ultimately. They will be the recipient of “found money” to ~75% of Daily Cash with $0 net cost of funds. It also signals $120 billion paid to developers move to Cash Card. More... https://qr.ae/TW8xCb
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I don't think you can count the entire card fees on Apple Store transactions as a gain; the payments will actually cost something to process!
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Dan, indeed. I hear ya. Apple as the card issuer and the merchant they bypass Interchange completely. This is a significant part of the merchant fee. At the end of the day, Apple will also become the Acquirer and remove those final pennies. I predict it will be blockchain.
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they bypass the fee, but they have to provide the actual service. Something about iTunes makes me think Apple might not be the most efficient provider of large scale transaction services.
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Dan, indeed. Great point. I think Apple has crafted a brilliant and sublimely simple buying experience with Apple Pay. It moves a step past the 1-click system that just about created Amazon. These are the nuanced experiences Apple proves folks will pay more for.
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