The Wall Street Journal recently highlighted the precarious position of CoreCard, led by Leland Strange, a key technology provider for the Apple Card, as Goldman Sachs continues its exit from consumer banking. The partnership between Apple and Goldman Sachs, which brought distinctive features to the Apple Card, has been fraught with challenges, leading to significant financial losses for the investment bank and casting uncertainty over CoreCard's future.
Goldman Sachs' foray into consumer lending, including the Apple Card and partnerships with General Motors, has resulted in substantial pre-tax losses exceeding $6 billion since early 2020. The bank's CEO, David Solomon, has indicated a strategic shift back to its core investment banking and wealth management businesses, seeking to offload its consumer credit card portfolios. The Apple Card, while popular with consumers, proved unprofitable for Goldman due to its fee-free structure, generous cashback rewards, and a higher-than-average delinquency rate.
Apple has reportedly proposed an end to its partnership with Goldman Sachs within the next 12 to 15 months, with JPMorgan Chase emerging as the leading candidate to take over the Apple Card portfolio, valued at approximately $20 billion. This potential transition aims to provide Apple with a more stable banking partner, given Goldman's mounting losses and regulatory scrutiny, including an $89 million fine from the CFPB for credit card account management issues.
CoreCard has played a crucial role in developing some of the Apple Card's unique features, such as the first-of-the-month billing cycle and the interactive payment wheel that visualizes projected interest costs. This specialized processing work made CoreCard, a relatively smaller firm, a significant partner in the Apple Card ecosystem. The company's reliance on the Goldman Sachs partnership for the Apple Card was substantial, accounting for a large portion of its revenue.
However, the impending shift to JPMorgan Chase poses a significant threat to CoreCard. JPMorgan's extensive in-house processing capabilities mean it is highly likely to absorb the Apple Card processing internally, potentially leading to CoreCard losing its largest client. This uncertainty has previously impacted CoreCard's stock and contributed to its acquisition by Euronet, underscoring the ripple effects of major corporate strategic shifts on their specialized partners.