The Apple Card Trojan Horse

The Apple Card has intrigued me since being announced in March 2019. The power of iPhone. In a credit card. as the site says. Partnered with Mastercard and Goldman Sachs.

And out now for early users, apparently.

There’s been some good thought about how disruptive it will be to the payments system, taking on the flag that Apple Pay began and expanding by allowing much stronger digital identity verification to reduce transaction fraud etc. And possibly extending this as a KYC (Know Your Customer) service for eCommerce and retail.

But what if it’s a lot more intriguing that that…something that has been bouncing in my head for a while…

What has been gained from Apple Pay?

Besides an increasing slice of Apple Services revenue and a shift to over 1 bn transactions via Apple Pay? As part of that, Apple have secured a large number of users who are increasingly comfortable with their phone being a daily payment transactor. More interestingly, they’ve gained essential familiarity with regulators and partners in a different core industry – banking. Apple Pay has been the first foray into banking and regulators, and overall Apple has presented well – looking like a positive contribution to the market as a brand and platform, with a secure, consumer friendly payment system.

This has cemented Apple’s credentials in the money ecosystem. Which is where Goldman Sachs and Mastercard come in for the Apple Card. Mastercard has >875 million cards worldwide, and 231 million of those in the USA, while Goldman Sachs’ Marcus product (aimed at consumer investment) has US$48bn in deposits and US$5bn in loans – part of a division that generated over US$2.5bn in revenue in the quarter ending June 2019. These are substantial plusses to connect Mastercard’s payments and identity network, with Goldman Sach’s verification and consumer spend network, and the consumer and identity security technology in Apple’s devices.

Then take it up a notch with the announcement that iOS13, to be launched in last quarter of calendar year 2019, will begin to read passports in at least USA and UK. In essence, the iPhone could replace the passport as a travel document. This allows the financial and individualised data to combine with the identification ‘truth’ of the passports to be inexorably linked by Apple’s ID network. Apple’s devices would be recognised as on-par with the most trusted form of identification – the passport.

The Trojan Horse was made of wood

Why a Trojan Horse, besides the oh-so-punny idea of secrecy and getting through the walls? Because the Horse was made of wood – lots of interconnected pieces of timber into one big war-winning icon.

Apple’s network already is an absolute treasure trove of personal data on a global scale. Apple had over 1.4 billion users globally through the start of 2019 (with a claim of 900 million iPhones). Even with the reality that there many users have multiple devices, that’s a lot of data cheddar. And I don’t just mean payment based – think bigger.

Imagine the kind of identity model you could base off the data in your Apple ID – where you visit (both physical and virtual), your subscriptions (even how often you start and cancel trial subscriptions), your purchasing patterns on the Amazon app, how often you change cards or use gift cards, the types of apps and frequency and type of usage could build a far more accurate picture of a person than anything in market. It’s a picture of who that ID is, how they spend, who they connect with/socialise with, and importantly – how this can be used to identify how risky they are as an individual.

For example, what’s the credit or identity risk of a person who subscribes to 2 financial newspapers, has a LinkedIn Premium account, multiple streaming accounts, sports betting, games, but changes their credit card payment regularly, or uses gift cards rather than a credit card? What about if you correlated that with their travel, sharing and spending patterns? Or how often they go over their mobile data? All of that data is there on the device.

Then combine that with the veracity of tying your passport with the individualised security and biometric verification on the device? It’s about the closest I can think of to being an identity source of truth. But how to turn it something bigger than a collection?

This is where Goldman Sachs and Mastercard build the definitive credit and identity verification model. It could go way beyond identity verification for retail/spending, and to becoming a ‘source of truth’ on a government/social/global scale – it could allow for the model to definitively identify the person, their habits, their social circles, and their risk profile.

Extreme of course.

And in keeping this abstracted from any political diatribes – I know the boffins at Apple are proud of their identity approach in a good way (independent, secure, consumer first, and on-device). Let’s also be honest, there are a LOT of regulatory hoops to jump through to allow interconnectivity that goes this deep.

I do like to think this isn’t about pure revenue value – the identity verification market is valued at a fairly small US$12.8bn by 2024. It’s the adjacent growth that makes this intriguing if used at scale. An AppleID/device becomes a means to store all your identity, movement, banking frequency, network, email, social…it’s not just a device. It essentially IS you.

It’s a complex model for Apple, let alone the hidebound regulators to achieve both scale and user trust. It’s fertile ground for regulator discussions, conspiracy theorists and philosophical wars between the pro and neo-cons of the world.

It would take years for the above ideas to achieve scale, taking into account the general timespan to scale up something of this depth, as well as the general plateauing of new device sales. It’s already been four years since Eddy Cue first discussed the ambition of Apple to take on passports, and the next steps are both complicated, and potentially very niche while it builds up steam into a serviceable, industry-wide (and regulator worthy) identity ecosystem.

It’s started with Apple Pay, and it can step neatly to the Apple Card and credit card fraud as a next step. Or, as the Apple Card says:

You’ll know so much more about your spending. At a glance.


From there?

The power of iPhone. In a credit card.

All your habits, at a glance.

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