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Opinion: Seven reasons I think Apple may become a bank within the next five years

apple-bank

I first speculated that Apple might one day become a bank almost a year before the launch of Apple Pay. What triggered that thought was the use of Touch ID for iTunes purchases and the depth of security involved in the secure enclave used by Apple’s fingerprint system. It was clear even then that Apple had big ambitions in the mobile payment field.

Now that Apple Pay has launched, and already proven a big success, I think the argument for Apple to make the move are even stronger. So here are seven reasons I think Apple may become a bank within the next five years … 

1. People hate existing banks

Ok, that’s something of an exaggeration, but not too much of one. It wasn’t like banks topped anyone’s most-loved list even before the banking crisis, but the resulting financial crash put bankers onto pretty much everyone’s hate list. A three-year study of millennials found that all four of the leading U.S. banks were in the ten least-loved brands.

Many people stick with their existing bank for only two reasons: changing banks is a hassle, and they don’t think any other bank would be noticeably better. Those two factors make people look way more loyal to their bank than they really are. Offer them a truly better experience, and a hassle-free way to make the move, and I think many people would switch.

2. People love Apple

Apple’s brand image couldn’t be further removed from that of the average bank. And while Apple’s credentials might not seem to easily translate to banking, there’s one area where Apple’s reputation would mean a great deal: customer service.

Banks are usually dreadful at customer service. They seem to prioritize their own systems and procedures over the customer experience almost every time.

I did actually recently go through the hassle of switching business banks because my old bank not only managed to reject an incoming international payment, it was completely unable to explain why. I logged a complaint, and its complaint-handling was even worse than the original mistake. Mentioning it to friends, this kind of experience appears far from unusual.

Apple’s approach to customer service is up there with the best in the business.

3. Apple is winning mobile payments

Mobile payment was around for many years before Apple Pay, yet adoption in most countries had been extremely low. Apple changed that story almost literally overnight, Tim Cook reporting that the company more than doubled the size of the mobile payment market in just 72 hours, with a million card activations.

Banks have been as keen as consumers to adopt the new payment method, with well over 300 U.S. banks and credit unions now supporting it – and international expansion on the way.

Apple is even effectively acting as a financial gatekeeper, deciding which banks and cards are good enough to be accepted into the program.

4. Apple has the right technology

One of the key reasons Apple Pay has taken off so fast is because Apple Pay offers a greater level of security than any other payment method. It offers the convenience of contactless cards – fantastically convenient but with very few safeguards – with the best security in the business.

The gold standard for card security had, until Apple Pay, been the chip-and-PIN cards used in Europe. Transactions have to be validated by typing in a PIN, with rolling encryption protecting the data stored in the embedded chip. It’s a very secure form of payment – but Apple Pay beats it in two ways.

First, while a PIN should guarantee its the cardholder making the transaction, Touch ID actually does so (low-likelihood hacks aside). Second, while chip-and-PIN hands over your actual card details to the payment terminal, Apple Pay transmits only a one-time code, meaning you don’t have to worry about the retailer’s database being hacked.

5. Apple also knows how to do UI

My bank, unusually, gets a lot of things right. But its mobile banking app is a mess. The user interface is just horrible, and even if I’m logging in on my Mac, I still have to use the iPhone app to generate a code – so I can’t escape that UI.

If there’s one thing Apple (usually!) knows how to get right, it’s the user interface. The right tech working in the right way is going to be appealing right now; factor in a future where banking, like everything else, is going to get more and more hi-tech, and Apple’s UI strength becomes ever more important.

6. Apple has the financial resources

Apple is the largest company in the world. It has enormous cash reserves. Those two facts should make getting the necessary regulatory approvals a done deal, and also lead to extremely high levels of consumer confidence.

7. Younger consumers are ready & waiting

Two recent surveys suggest that millennials – those aged 18-34 – would be more than happy to consider a tech giant like Apple or Google as their bank. The three-year study I linked to above found that 73% would be more excited about a new financial services offering from a large tech company than they would one from their own bank. A separate survey suggests that around half of millennials would specifically be willing to bank with Apple or Google.

Put these reasons together, and I’d put money on it that Apple is at least considering the idea. As with anything Apple considers, that doesn’t mean it will actually do so, of course – and there is one very strong argument against my thesis. For all Apple’s move into services like Apple Music, it is first and foremost still a hardware company. Not only that, but an extremely focused hardware company, famous for saying no to a thousand different ideas for every one time it says yes.

So I don’t think it’s a foregone conclusion. But I do think the arguments for outweigh the arguments against, and that those arguments grow stronger with every new Apple Pay customer. I’m not going to go so far as to say it will happen – but I do think it’s at least a strong possibility.

Am I right, or am I crazy to even think this could happen? Take our poll, and let us know your views in the comments.


Filed under: AAPL Company, Opinion Tagged: AAPL, Apple Bank, Apple Inc, Apple pay, banking, finance, Opinion

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Apple announces major new bond sale to finance increases in capital return program

apple-cash1

At its last earnings call, Apple announced that it is expanding its capital return program by more than 50%. This means the company is now looking to repurchase over $140 billion worth of shares and a larger dividend for shareholders.

To fund this activity however, it is cheaper for the company to sell domestic company debt than repatriate its ever-increasing cash hoard that is ‘trapped’ overseas. Therefore, Apple has today announced it will issue a new 7-part bond to raise the funds.

As the company has the second best credit rating possible, second only to nations, it can offer bonds at a relatively cheap rate. Although counterintuitive, it is significantly cheaper than repatriating foreign funds and paying US tax on its international cash.

The new 7-part bond is being managed by JP Morgan, Bank of America, Merrill Lynch and Goldman Sachs. The exact rates for the bonds, with maturities ranging from two to thirty years, will be disclosed later today.


Filed under: AAPL Company, Tech Industry Tagged: AAPL, bond, buyback program, finance

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Apple announces major new bond sale to finance increases in capital return program

apple-cash1

At its last earnings call, Apple announced that it is expanding its capital return program by more than 50%. This means the company is now looking to repurchase over $140 billion worth of shares and a larger dividend for shareholders.

To fund this activity however, it is cheaper for the company to sell domestic company debt than repatriate its ever-increasing cash hoard that is ‘trapped’ overseas. Therefore, Apple has today announced it will issue a new 7-part bond to raise the funds.

As the company has the second best credit rating possible, second only to nations, it can offer bonds at a relatively cheap rate. Although counterintuitive, it is significantly cheaper than repatriating foreign funds and paying US tax on its international cash.

The new 7-part bond is being managed by JP Morgan, Bank of America, Merrill Lynch and Goldman Sachs. The exact rates for the bonds, with maturities ranging from two to thirty years, will be disclosed later today.


Filed under: AAPL Company, Tech Industry Tagged: AAPL, bond, buyback program, finance

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Apple says it could face ‘material’ back taxes over Ireland tax arrangements

Following its announcement of record Q2 earnings, Apple published its quarterly 10-Q report, providing more in-depth details about finances. Notably, the company warns of the possibility of “material” back taxes due to the company’s well-documented favorable tax arrangements with Ireland.

On June 11, 2014, the European Commission issued an opening decision initiating a formal investigation against Ireland for alleged state aid to the Company. The opening decision concerns the allocation of profits for taxation purposes of the Irish branches of two subsidiaries of the Company. The Company believes the European Commission’s assertions are without merit. If the European Commission were to conclude against Ireland, the European Commission could require Ireland to recover from the Company past taxes covering a period of up to 10 years reflective of the disallowed state aid. While such amount could be material, as of March 28, 2015 the Company is unable to estimate the impact.

Apple will need to pay the fines if the European Commission, which is akin to the U.S.’s SEC, rules that Ireland granted Apple special privileges for reduced taxes. As the European Commission has not made any formal rulings on the fine, Apple says it could not estimate the impact. However, the Financial Times pegs the potential payments at $2.5 billion based on Apple’s current rate of profits.

The Wall Street Journal provides some math behind the aforementioned calculation, noting that “material” payments typically amount to approximately 5% of a company’s annual profits, before tax, for the past three years. The European Commission officially opened up its inquiry into Ireland and Apple’s tax practices last fall. A decision from Europe is expected in June. Apple has not commented further on the matter, but Apple CFO Luca Maestri told the FT last year that Apple “simply followed the laws in the country over the 35 years that [Apple has] been in Ireland.”


Filed under: AAPL Company Tagged: Apple, finance, Financials, Ireland, Taxes

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AAPL joining famed Dow Jones Industrial Average, replacing AT&T

AAPL March 6th

Apple will be joining the Dow Jones Industrial Average taking wireless carrier AT&T’s spot on the famed stock market index, CNBC reports. The change will take place in just under two weeks at the end of trading on March 18th. The Dow is heavily viewed as being indicative of the overall stock market performance in the United States, and Apple’s rising stock price will soon be a significant factor to that number.

The Dow Jones Industrial Average is currently made up of 30 major companies based in the United States including ExxonMobil, Microsoft, IBM, and Walt Disney.

Apple’s eligibility for joining the Dow was mentioned nearly a year ago when the company announced a 7-1 stock split bringing down its trading price per share from about $550 to about $80 at the time. Visa, another member of the Dow, is implementing a similar 4-1 stock split which makes room for Apple to join the DJIA replacing AT&T.

While inclusion in the Dow Jones Industrial Average has no direct consequence on Apple’s stock, it does imply a vote of confidence seen by conservative investors that otherwise may not be present. Apple’s stock performance, of course, will directly effect the DJIA from day to day.

Apple’s market capitalization is currently valued just under $750 billion, although the DJIA will factor prices per share of the company’s stock.

Press release follows…

Apple Inc. (NASD:AAPL) will replace AT&T Inc. (NYSE:T) in the Dow Jones Industrial Average (DJIA) after the close of trading on Wednesday, March 18. The change will be effective with the opening of trading on Thursday, March 19. The index change was prompted by Visa Inc.’s (NYSE:V) 4:1 stock split which is scheduled to be effective at the same time. The post-split adjusted lower price of Visa will reduce the weighting of the Information Technology sector in the index. Adding Apple to the index will help to partially offset this reduction. In price weighted indices such as the DJIA, a large change in price of a high priced stock can have a material impact on sector representation in the index and this index change is designed to minimize that impact. The Telecommunication Services sector will continue to be represented in the DJIA by Verizon Communications Inc. (NYSE:VZ).

“As the largest corporation in the world and a leader in technology, Apple is the clear choice for the Dow Jones Industrial Average, the most recognized stock market measure,” says David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices. “The DJIA is price weighted so extremely high stock prices tend to distort the index while very low stock prices have little impact. The timing of Apple’s addition to the DJIA hinged on two stock splits: Apple’s 7:1 last June and Visa’s 4:1 on March 19th this year. Apple’s split brought the stock price down closer to the median price in the DJIA. The Visa split will reduce the technology weight in the DJIA and make room for Apple. Among the current DJIA constituents, AT&T has one of the lowest prices. Moreover, the DJIA is over-weighted in telecommunications and AT&T and Verizon are quite similar, though AT&T has a smaller market capitalization.”

Apple, headquartered in Cupertino, CA, designs, manufactures, and markets mobile communication and media devices, personal computers, and portable digital music players. The change won’t cause any disruption in the level of the index. The divisor used to calculate the index from the components’ prices on their respective home exchanges will be changed prior to the opening on March 19. This procedure prevents any distortion in the index’s reflection of the portion of the U.S. stock market it is designed to measure.


Filed under: AAPL Company Tagged: AT&T, Dow, Dow Jones Industrial Average, finance, stock, Trading

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Intuit’s Mint app adds new bill reminder features, accessibility improvements, more

Intuit Mint 1 Intuit Mint 2 Intuit Mint 5

The popular Intuit-owned Mint finance management app updated to version 4.1 today adding new bill reminder features, more accessibility support, and general improvements all around.

Highlighted in the new version is the ability to manage bill reminders right from the app. For the iPhone version, bill reminders can be created, edited, and managed from the latest version of the app. A change to the Overview tab wraps all this together.

Mint has also enhanced the newly added Updates view to show upcoming bill due dates. The new Upcoming Bills Card will present any bills with a due date within the next seven days.

In terms of accessibility, Mint has added support in a number of areas of the app. This includes the login, signup, split transactions and transaction detail pages.

Mint 4.1 for iPhone and iPad is available for free on the App Store.


Filed under: Apps Tagged: accessibility, bill reminders, budget, finance, Intuit, Mint, money, money management, personal finance

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Apple builds national enterprise sales team for IBM partnership, targets industrial, healthcare, financial customers

Tim-IBM

Apple is looking to hire individuals across the US for a team of IBM Business Development Executives that “will be accountable for all aspects of the Apple and IBM partnership for a defined geographic and account set territory.” That means Apple is hiring a team of individuals that will act as company liaisons to help roll out and oversee sales teams pushing the new Apple/IBM iOS solutions to enterprise customers. The positions, which are industry and region-specific, also show Apple’s plan for the upcoming expansion of its enterprise solutions for new industries including manufacturing and healthcare. 

Apple says the team will “play a pivotal role in the U.S. success of the recently announced Apple partnership with IBM.”

Apple is hiring the IBM Business Developer Executives to act as liaisons for the various industries that Apple and IBM have been developing solutions for. Currently the company is hiring for the position in Seattle and LA for the Healthcare & Retail industries, in New York City for the Financial Services & Retail industries, and in Dallas and Chicago for Manufacturing and Retail.

Industry field liaison to IBM – will operate in specific industry capacities. For example, if an Apple AE has a ‘retail industry oriented territory’, the BDE will help facilitate connection to IBM’s retail leadership and team so Apple and IBM can be more meaningful in their strategic partnership, for retail industry customers. The BDE will also work to build like industry communities across the geography to ensure that we are collaborating well and sharing learnings and best practices to be greatly successful in all of those industry customers in the territory.

The positions for healthcare and manufacturing sectors are particularly intriguing, as Apple hasn’t yet announced solutions with IBM for those industries. At its Q1 earnings call late last month, however, CEO Tim Cook announced that another 12 apps through the IBM partnership would arrive in Q1 of this year. That would bring the total of solutions to 22 and add solutions for new industries including healthcare, energy & utilities, and industrial products.

Apple announced back in December that the first wave of software developed through the IBM partnership was ready with a number of new “MobileFirst for iOS” solutions for the enterprise. The companies announced 10 new apps designed specifically for businesses including banking, retail, insurance, financial services, telecommunications and for governments and airlines. Apple will likely be hiring more of these liaisons for its sales team as it rolls out additional apps for other industries.

When Apple originally announced the partnership with IBM back in July of last year, the companies said they would collaborate to bring over 100 enterprise apps & cloud services to the iPhone and iPad while launching a new AppleCare service specifically for enterprise customers.


Filed under: AAPL Company, iOS Devices Tagged: Apple, enterprise, finance, Healthcare, IBM, industrial, partnership, sales, Tim Cook

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