How Apple Makes a Splash in the Banking Business Amid a Banking Crisis

Apple (AAPL)'s consumer banking pivot is a happy marriage between Apple's strong brand recognition and Goldman Sachs's industry expertise. 

Tim Cook posing a V sign.
Apple CEO Tim Cook pivoted to the right business at the right time. Emma McIntyre/WireImage

On April 17, Apple introduced a high-yield savings account product to Apple Card customers that offers a 4.15 percent APY—a return more than 10 times the national average. Consumers were stoked. On launch day alone, the program brought in roughly $400 million in deposits and, within the first week, Apple acquired nearly $1 billion in deposits through more than 240,000 new accounts, Forbes reported on May 1.

The overwhelming interest in Apple’s new banking product stands in stark contrast to consumers’ waning trust in the U.S. banking system amid the ongoing turmoil of regional banks. Experts say Apple’s success is a result of both its strong brand awareness and a smart partnership with an established bank at the right time.

What makes the Apple Savings account so popular?

The main appeal of the Apple Savings account is its high return and the easiness to set up—it has no fees, minimum deposits or balance requirements, and the ubiquity of iPhones in the U.S. makes it convenient for existing Apple Card customers to open a savings account on their phones. More importantly, Apple launched the product with a powerful partner, Goldman Sachs, to make up for its limited experience in the banking business.

Although the savings account is branded with an Apple logo, Goldman Sachs is the actual bank holding and managing customer deposits. While the demise of Silicon Valley Bank and, more recently, First Republic damaged the reputation of regional banks, it has actually boosted consumers’ reliance on large national banks like Goldman, bringing an influx of deposits in recent months, reports show.

Among national banks, the average savings account yield is less than 1 percent, which makes Apple’s offer extremely attractive. Goldman’s own high-yield savings account, housed under its consumer banking division, Marcus, offers a slightly lower return of 3.90 percent.

Apple’s brand recognition is a strong driver of new customers

As attractive as Apple’s savings return is, it is by no means the highest in the market, said Vincent Curotto, a director at Klaros Group, an advisory firm that works with fintechs pivoting into consumer banking. On personal finance site Bankrate, for example, some small banks are offering savings APYs as high as 4.75 percent.

“Given what we’ve seen in the last six months, all banks have been forced to raise deposit rates to remain competitive,” Curotto told Observer, referring to the Federal Reserve’s continuous interest rate hikes since last year.

But Apple’s strong brand recognition helps drive new customers. “Apple obviously wanted to make a splash with a competitive deposit rate offering,” added Curotto. “And, given the amount of press they’ve received, they’ve succeeded.” Curotto also pointed out that many smaller community banks and credit unions offer interest rates closer to 5 percent but, because they don’t have the brand name attached, it’s much more difficult to make headlines.

Like every other bank, how long Apple and Goldman can keep the sweet deal going will depend on the Fed’s future interest rate decisions as well as who has a bigger say in banking product pricing.

“Deposit rates are directly correlated with the broader interest rates. If the Fed lowers rates, Goldman may choose to reprice the offering,” Curotto said.

Who is leading Apple’s foray into banking?

Apple’s fintech products are led by Jennifer Bailey, its vice president of Apple Pay and Apple Wallet. Bailey is a seasoned tech executive who has worked at Apple since 2003. She has led Apple’s foray into financial services since 2014, overseeing the launch of Apple Pay that year and the introduction of Apple Card, a credit card product, in 2019. Also issued in partnership with Goldman, Apple Card had 6.7 million users as of early 2022. Apple Card is known for its Daily Cash feature that gives cardholders as much as 3 percent in cash back on eligible purchases.

“Our goal is to build tools that help users lead healthier financial lives,” Bailey said in a press release last month announcing Apple Savings in the U.S. “Building savings into Apple Card in Wallet enables them to spend, send, and save Daily Cash directly and seamlessly—all from one place.”

Apple is scheduled to report earnings for the first three months of 2023 on May 4.

How Apple Makes a Splash in the Banking Business Amid a Banking Crisis