Apple and JPMorgan Chase Move Closer to Alliance That Could Reshape the Credit Card Landscape

JPMorgan Chase is talking to Apple about taking over the tech giant’s credit card program, according to an exclusive report in The Wall Street Journal. A deal of this size wouldn’t just impact the two companies at the heart of the agreement, it could leave JPMorgan Chase’s competitors at a disadvantage.

Goldman Sachs is Apple’s current card partner, and the two companies previously agreed to keep their deal in place until 2030. But David Solomon, the CEO of Goldman Sachs, said earlier this year that “there’s some possibility that it won’t continue until that time frame.”

The move is expected to make waves in the credit card ecosystem. JPMorgan Chase is the largest commercial bank in the U.S., and Apple has been a leader in the tech world throughout the 21st century.

By working together, the two companies can take advantage of synergies to create a valuable experience for cardholders.

Earlier this year, Goldman Sachs’s CEO indicated the company’s deal with Apple could end before 2030.

A potential deal between JPMorgan Chase and Apple may yet fall apart. Apple’s card program has a lot of exposure to subprime borrowers. And that’s playing a part in how much JPMorgan Chase would be comfortable paying Goldman Sachs to accept those balances, according to the WSJ report.

“As of the end of March, some 34% of Goldman’s credit-card balances are tied to people with less than a 660 credit score, on a scale that tops out at 850,” the WSJ reported. “At JPMorgan that figure was 15%.”

Chase would bring better discipline to the portfolio because they would want to control losses, said Brian Riley, Co-Head of Payments Research for Javelin Strategy & Research. 

“In the most recent Dodd-Frank Stress Tests, under severe economic conditions, Goldman Sachs would experience a 23.4% credit loss, and Chase would be only 16%,” said Riley. “You can be certain that Chase will not want to dilute their credit quality, which would significantly reduce the Apple volume.” 

In spite of the potential hang-up over subprime borrower exposure, JPMorgan Chase has a lot to gain by taking over Apple’s card program. For starters, it would allow the biggest bank in the U.S. to more effectively engage with Apple customers, who are among the most loyal in the consumer electronics space.

JPMorgan Chase could then cross-sell its other banking products to people with Apple credit cards, including loans and other emerging payment solutions, down the line. 

“I imagine the cross sell may also include things like Apple Music or Apple+ being included in other Chase credit card products as a part of the deal,” said Tony DeSanctis, Senior Director at Cornerstone Advisors. “I think the Apple+ and music benefit being included in the new Sapphire Reserve product is a good indication of where this could go.”

Other credit card issuers may be envious of JPMorgan Chase if the company reaches a deal with Apple. They may fear that they’ll lose market share to JPMorgan Chase as well as an opportunity to align with Apple’s respected brand.

But they may have wished they were in Goldman Sachs’s shoes when it first struck a deal with the tech giant. And that partnership is close to reaching a premature end.

The final chapter of this saga has yet to unfold, and a new suitor could still emerge to partner with Apple. We’ll continue to keep an eye on the situation as it progresses.