the primary cause is loan-loss provisions which are when a bank has to compensate for greater than expected unpaid credit card balances and loans.
Sooo Apple Card users used more credit on their credit cards than expected?
I thought that was good for banks? Don’t you have to pay interest on that? I’m not entirely sure, because I’m not used to the (in my view primarily american) credit card system of “paying off credit cards”, which I know mostly from TV.
The only way this makes sense seems to be if you don’t pay any interest if you return the money in a certain timeframe. That would mean the Bank effectively has to eat the interest-cost, and could have more cost.
$659 million in quarterly revenue
…
Goldman had $544 million in credit losses and $987 million for operating expenses
Credit loss: a loss that a business or financial organization records, which is caused by customers not paying money they owe
So, the division had only 660 Million Revenue, lost 544 million to people not paying their debt (is that money gone, or are those people still owing that money to Goldman?) and paid nearly a billion to operate this for a single quarter?
dafuq?
Is Apple Card in danger if Goldman does their best to pull the plug?
Goldman is in talks with American Express for the sale of their credit card division. If that happens, American Express will likely become the network for Apple Card. It kind of makes sense because Costco leaving American Express was a big blow to them. But, it will be less than ideal because not everyone accepts American Express.
And the billion dollars is to pay the salaries, run the computers, etc
Running a big credit card company is expensive. Things like PCI compliance make it far more complex than a regular company with extra staff just handling compliance functions.
I’d also assume Apple require competent support staff, minimal automation, etc which raises the cost again, but delivers a better product. Support for AppleCard through GS is really good.
Then making and physically mailing anything adds costs.
The cost is also the whole retail unit, which includes Marcus banking and other products, not just AppleCard.
wait what?
Sooo Apple Card users used more credit on their credit cards than expected?
I thought that was good for banks? Don’t you have to pay interest on that? I’m not entirely sure, because I’m not used to the (in my view primarily american) credit card system of “paying off credit cards”, which I know mostly from TV.
The only way this makes sense seems to be if you don’t pay any interest if you return the money in a certain timeframe. That would mean the Bank effectively has to eat the interest-cost, and could have more cost.
So, the division had only 660 Million Revenue, lost 544 million to people not paying their debt (is that money gone, or are those people still owing that money to Goldman?) and paid nearly a billion to operate this for a single quarter?
dafuq?
Is Apple Card in danger if Goldman does their best to pull the plug?
Goldman is in talks with American Express for the sale of their credit card division. If that happens, American Express will likely become the network for Apple Card. It kind of makes sense because Costco leaving American Express was a big blow to them. But, it will be less than ideal because not everyone accepts American Express.
Less than a billion. Chump change for them. Don’t think that’ll cause any hardship
just because they propably could afford to lose the money, doesn’t mean that they will.
Money gone. This is pretty much they insurance for bad debt and they have a lot of it.
Goldman can just immediately pull the plug. They’ll have contracts with Apple to provide the service with long notice periods before stopping.
If Goldman just turned it off Apple would sue them out of existence. Apple is far larger and richer than Goldman.
Goldman would never get another partnership deal done with anyone else either. It destroys long term credibility.
As for people not paying debts, the debt remains but costs money to pay debt recovery teams to get back, or can be sold, but at a loss.
And the billion dollars is to pay the salaries, run the computers, etc
Running a big credit card company is expensive. Things like PCI compliance make it far more complex than a regular company with extra staff just handling compliance functions.
I’d also assume Apple require competent support staff, minimal automation, etc which raises the cost again, but delivers a better product. Support for AppleCard through GS is really good.
Then making and physically mailing anything adds costs.
The cost is also the whole retail unit, which includes Marcus banking and other products, not just AppleCard.