Mr Elliott said Apple’s move may force Australian banks to adapt their products as they waited for the company to decide on whether to roll more financial services out globally.
“The nature of competition in banking continues to change. This is a further indication the sector will continue to see increased intensity and new entrants,” he told The Australian Financial Review.
“Banks don’t just compete with other banks anymore. We have lots of well-resourced, highly sophisticated service providers keeping us on our toes and driving better outcomes and lower costs for consumers and small businesses.”
Apple Card users in the US can grow balances by automatically depositing cash into a high-yield savings account from Goldman Sachs. Apple
Apple’s move into savings accounts comes on top of its popular payment product known as Apple Pay, which is offered by all the major Australian banks and many smaller lenders, and a new buy now, pay later product announced last month, initially only for customers in the US.
The expansion into financial services shows one of the world’s largest technology companies sees financial products as a way to attract and retain new customers, as it looks to lift revenue from supplying services, which also include music and TV streaming and cloud storage.
Embedded finance
The trend of non-banks offering banking services to customers via “white label” deals with existing banks is known as “embedded finance”, a market McKinsey said in a report last year was already worth $US20 billion in revenue in the US in 2021 and could double in size by mid-decade.
If Apple Card was brought to Australia, it is unclear whether Goldman Sachs could offer the accounts, or whether Apple would need a local banking partner. Goldman can offer the 4.15 per cent interest rate and make a return by investing the funds with the US Federal Reserve at the cash rate of 4.75 to 5 per cent.
Mr Elliott said Apple Pay had fundamentally changed the way people pay and transact, particularly in Australia, where it helped to accelerate the trend away from the use of cash.
“We need to continue to think about what products and services our customers want to see, as they continue to move away from bricks and mortar banking and instead focus on digital services, to bank when and how it best suits them,” he said.
Many Australian banks, including ANZ, offer interest rates of over 4 per cent on savings accounts; ANZ’s digital-only savings product ANZ Plus is paying 4.25 per cent.
However Apple’s rate is higher than the big four’s main online saver accounts, which have ongoing rates ranging from 1.10 per cent to 1.85 per cent, according to RateCity. (CBA NetBank Saver pays 1.85 per cent, Westpac’s eSaver 1.1 per cent, NAB’s iSaver 1.6 per cent and ANZ Online Saver 1.1 per cent.)
Times are changing. ANZ chief Shayne Elliott at ANZ’s Apple Pay launch back in April 2016. Jessica Hromas
Apple’s vice president of Apple Pay and Apple Wallet Jennifer Bailey said earlier this week the company’s goal with the savings account “is to build tools that help users lead healthier financial lives” and “building savings into Apple Card in [Apple’s] wallet enables them to spend, send, and save daily cash directly and seamlessly all from one place”.
Other bankers are growing concerned about Apple’s shift into financial services given current legislation makes it difficult for the Reserve Bank and other regulators to oversee its activity in the financial sector.
The Financial Review reported in December that Apple is raking in more than $110 million in annual fees from Australian banks, an amount that will rise as paying with mobile phones becomes more common. Any move into savings would see Apple have a bigger impact on the banks if it challenged their ability to attract or retain deposits.
Commonwealth Bank has raised questions about Apple’s control of iPhones which prevents local banks accessing ‘tap and go’ functionality meaning payments with iPhones cannot be made directly from banking apps.
Reserve Bank governor Philip Lowe said in December that new powers over global technology companies could be used to investigate whether restrictions Apple places on bank access to its digital wallet Apple Pay are anticompetitive. The government has agreed to provide the RBA with the powers but has not yet released any details of possible changes.
Changes to the Payment Systems (Regulation) Act 1998 would allow the RBA to classify Apple as providing payments services, which would allow the central bank to collect data and potentially to intervene to ensure fees are fair. They could also allow the RBA to make directions that Apple invest in local infrastructure or even provide bank apps with access to its devices.
