Reports indicate that discussions are taking place between Apple and Goldman Sachs Group with a view to having the latter offering loans to consumers to buy the former’s devices such as iPhones, iPads, watches as well as other gadgets. This could for instance see consumers interested in purchasing the iPhone X costing $1,000 getting loans from Goldman rather than having their credit cards charged as it would be cheaper in terms of interest rates. However the talks are still at an advanced stage and could either proceed or fall apart.
Should the investment bank and the tech giant reach a deal it would be a big win for Goldman Sachs’ new consumer bank, Marcus, which was launched in 2016. Though it has made a name for itself offering advice to governments and corporations, the investment bank is diversifying into retail banking as well as plain-vanilla lending. This is a strategy of pursuing growth following a slump in its core areas of strength such as trading.
Refinancing credit-card debt
When Marcus was launched two years ago its focus was on assisting customers refinance their credit-card debt. Goldman is now growing the business to include offering financing at the point of sale.
Last year over $200 billion was borrowed using credit cards in order to finance purchases. These credit cards were mostly affiliated with POS loans or retailers according to estimates from Fist Annapolis, a consulting firm. Around $80 billion was spent on big-ticket items such as electronics and furniture. Such items usually require months before they can be fully paid off and this generates extra interest fees when borrowers roll over their balances from one month to another.
By offering loans that cost less, the legendary investment bank is hoping to get in on some of the action. On an average loan offered by Marcus interest rates are usually 12%. This compares favorably with credit card which charge more than 20% besides other charges such as late fees.
A partnership with a big retailer such as Apple is critical to the success of Marcus. This is because millions of customers can be delivered to the Goldman Sachs unit at a fraction of the cost it would take the lender to acquire on its own.
Three years ago Apple launched a program in partnership with regional bank Citizens Financial Group where the lender offered loans at zero interest for consumers willing to upgrade their iPhones. It is understood that Goldman could take over some of this business from the regional bank.