Apple card user base grows, balance per user remains low

On Wednesday, analysts highlighted the growth trajectory of the Apple (NASDAQ:AAPL) Card, emphasizing its expansion to over 12 million customers and $17 billion in receivables by September 2024. Despite this growth, the average balance per card was reported to be less than $1,500, suggesting that the program does not primarily attract high-income, high-spending customers. With an estimated $35 billion in annual purchase volume, the card’s net revenue yield for networks like Visa (NYSE:V), currently valued at $676.88 billion in market cap with impressive 97.82% gross margins, and Mastercard (NYSE:MA) is approximately 0.3-0.4%.

The analysis pointed out that the current issuer, Goldman Sachs, has not found the Apple Card economically beneficial, which has implications for the user experience offered to Apple customers. This situation may influence Apple’s decision-making process when selecting a network, as the company considers finding a new issuer for the card.

Visa and Mastercard were noted to have certain advantages over American Express (NYSE:AXP) in terms of network capabilities. InvestingPro analysis shows Visa as a prominent player in the Financial Services industry with strong cash flows to cover interest payments. Their extensive relationships with almost all card issuers could be beneficial for Apple in its search for a new partner. Additionally, the integration of the Apple Card with Apple Pay and the potential technological benefits from Visa and Mastercard’s tokenization capabilities were also mentioned as factors that could influence Apple’s decision. With 10+ additional ProTips available on InvestingPro, investors can gain deeper insights into Visa’s competitive position.

Analysts concluded that the combination of the Apple Card’s performance and Apple’s specific requirements has made it challenging to find a new issuer. The large portfolio, which is not meeting financial objectives, adds to the complexity of this task for Apple. For comprehensive analysis of Visa’s valuation and growth prospects, access the detailed Pro Research Report available exclusively on InvestingPro.

In other recent news, Visa has made a substantial offer of approximately $100 million to Apple in an attempt to replace Mastercard as the network for the Apple credit card. This move comes amid Goldman Sachs’ plans to exit the consumer lending sector, with major banks and networks, including American Express, vying for a partnership with Apple. Additionally, Visa is in discussions with the blockchain ecosystem World Network to integrate Visa card functionality into cryptocurrency wallets, potentially expanding its reach in the fintech sector. This partnership could enable World Network users to access various financial services, including stablecoin-based payments through Visa’s extensive network. In a separate development, Visa has thwarted over $350 million in scams through its newly established Scam Disruption department, highlighting its commitment to enhancing security. Moreover, TD Cowen analyst Bryan Bergin has raised Visa’s stock price target to $382, maintaining a Buy rating, following insights from Visa’s Investor Day. Bergin noted the company’s strong market position and the positive impact of Visa’s evolving revenue mix on investor confidence.

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