Brief:

• Apple and Goldman Sachs this spring will issue a joint credit card, sources told The Wall Street Journal. The companies will first test the card with employees in the next few weeks before a wider rollout. The companies started developing the plans last year, the Journal reported in May.
• The plans include offering more features in Apple's Wallet app, including financial planning tools like setting budgets, tracking rewards and managing credit balances.
• The credit card, which will carry the Apple Pay brand, will use Mastercard's payment network. Cardholders will earn cash-back rewards of about 2% on most purchases and potentially more on Apple gadgets and services, the Journal reported.

Insight:

Apple and Goldman Sachs are entering a crowded field that mails billions of credit card offers to U.S. consumers every year. The companies will need to provide value-added services that distinguish the Apple Pay credit card from rivals that offer rewards like airline miles, hotel stays, access to airport lounges and other travel perks. Apple's key advantage is the popularity of the iPhone, and the tendency of smartphone owners to check their devices an average of 150 times a day. By integrating the Apple Pay card more closely with iPhone services, Apple may appeal to tech-savvy consumers who are early adopters of mobile payments and contactless checkout.

The Apple Pay credit card is part of Apple’s effort to diversify revenue from the iPhone, which makes up about two-thirds of its revenue. The tech giant’s services business, which includes Apple Pay, is one of its fastest-growing segments. Apple collects a small cut of Apple Pay transactions, and having its own branded credit card will give the company a slightly bigger commission, the Journal reported. Mobile payments haven’t caught on that quickly in the United States, especially compared with some parts of China, and an Apple Pay credit card may help to boost the popularity of its payment platform.

Goldman, which converted itself into a commercial bank to help survive the 2008 financial crisis, has worked to build out retail banking services to diversify revenue and clientele, but without investing heavily in an expensive branch network. Goldman started an online consumer bank called Marcus in 2016 to make up for a decline in securities trading. The bank wants to grow its customer base among well-off young adults who are fans of a brand like Apple.

Apple's deal with Goldman is not its first foray into financial services. It follows a partnership with TD Ameritrade that lets customers transfer money to a brokerage account with Apple Pay using Business Chat on an iPhone or iPad.