Apple Card: A wake-up call for traditional banks

By Nanda Kumar, CEO of SunTec
Nanda Kumar, CEO of SunTec, discusses why the launch of Apple Card savings account should be a wake-up call for legacy banks

In April 2023, Apple announced the launch of the Apple Card savings account in partnership with Goldman Sachs. Nanda Kumar, CEO of SunTec, works with the world’s largest banks and shares his thoughts on what it means for traditional banks - and why it brings customer hyper personalisation to the forefront.

What Apple Card savings account means for traditional banks

When Apple launched the Apple Card savings account in April 2023, there were reports that it attracted almost $990 million in deposits and 240,000 accounts in less than a week. Apple’s initial foray into the financial services sector began with Apple Card facilitating payments on Apple devices, and quickly expanded into traditional banking services like savings accounts and deposits, with an overwhelmingly positive response from customers. This rapid success served as another reminder to traditional banks of the unprecedented threats technology providers may pose - and how critical it is for banks to transform their business models and strategies if they want to remain competitive.

Other tech organisations too have ventured into the financial services space – but why has the Apple Card savings account been so successful? To begin with, the Apple brand is one of the most valuable brands in the world and has a huge customer base. Then there is the prevailing market context around the time of its release.

In Q1 2023 the American financial market reeled from the collapse of the Silicon Valley Bank and other bank failures. Inflation remains persistently high, and there is still the threat of recession. Amidst this, Apple introduced a high-yield savings account with an interest rate of 4.15 percent, no fees, and no minimum balance requirement. And it is extremely easy to use, with the existing Apple wallet serving as the banking interface. By offering benefits that traditional banks don’t and relying on its trusted brand, Apple was able to shift consumer mindsets and quickly and successfully penetrate a traditional banking space. 

The changing priorities of modern customers 

Modern customers value ease of use, convenience, hyper-personalised offerings, and relationship-based engagement in their banking experiences. They want access to banking platforms anytime, anywhere – and not just for payments but for other financial services. The rise of embedded finance, expected to reach $230 billion by 2025, shows that customers are open to trying new banking options offered by non-traditional providers. Younger demographics like Millennials and Gen Zers who are just entering the formal banking economy have higher and different demands when it comes to innovation and convenience. They are also brand conscious and hold the brands they engage with to higher ethical standards, including diversity, inclusion, sustainability, and ethical practices.

Shift in customer priorities an opportunity for traditional banks

No, the shift in customer priorities does not spell the end of traditional banks. Instead, it presents an opportunity for banks to transform themselves to meet the demands of the modern customer. While technology plays a crucial role in this transformation, banks must go beyond digitising operations and focus on also transforming their brand image while embracing innovation. They can explore partnerships with fintechs and technology giants to offer embedded finance and Banking-as-a-Service (BaaS) models, delivering personalised and innovative solutions to customers. Leveraging the emerging API economy can help banks become orchestrators of a banking ecosystem, integrating financial and non-banking partners to fulfil customer requirements. This is the time for banks to make concerted efforts to enhance their brand presence and ensure their offerings and values resonate with younger generations.

How banks can achieve a hyper-personalised service 

To enable hyper-personalisation, banks need to break down organisational silos and utilise customer data collected from various touchpoints. This data will help banks understand the complete relationship and value of each customer. It will serve as the foundation for hyper-personalised offerings, including pricing, offers and bundles, loyalty programmes, and rewards. Moreover, customer data analysis is essential for any banking ecosystem that the bank orchestrates.

Banks must focus on collecting and analysing vast amounts of customer data from multiple sources. This includes transaction data, browsing patterns, social media activity, demographic information, and other relevant data points. Advanced analytics techniques such as machine learning and artificial intelligence can be employed to extract valuable insights from the data. Customer data analysis enables banks to gain insights into individual customer preferences, behaviour patterns, and needs. By understanding customers on a granular level, banks can deliver personalised experiences, tailored product recommendations, and relevant offers. This leads to increased customer engagement and loyalty.

Upgrading technological foundations 

Banks require a technological foundation that is agile, scalable, and powerful. Many existing legacy core systems operated by banks cannot support new banking models or perform effective analytics for personalisation. But banks do not need to completely overhaul their legacy systems. They can partner with specialised technology providers, like SunTec, who can deploy robust cloud-based middleware platforms over the existing core systems. Such platforms leverage artificial intelligence (AI) and machine learning (ML) to analyse customer data, facilitate effective personalisation, and enable the implementation of new business models.

How banks can ensure long-term growth, profitability, and competitive success

Traditional banks still enjoy significant customer trust and hold substantial customer data.  Banks must utilise this data to create personalised products, services, and experiences that align with individual customer needs and preferences. Customer data enables banks to segment their customer base into distinct groups based on specific characteristics, behaviours, and preferences. This segmentation facilitates targeted marketing efforts, allowing banks to deliver relevant offers, promotions, and product and service recommendations to each segment, increasing the effectiveness of their campaigns.

Banks must embrace a modernised banking approach that prioritises customer needs and convenience. Innovation-based value creation, coupled with security and reach, can position traditional banks for long-term growth, profitability, and competitive success.

About the author

SunTec CEO Nanda Kumar works with the world’s biggest banks. He helps detail the implications for traditional banks of up-and-coming fintechs and believes the Apple Card savings account is yet another reminder of the unprecedented threats from new competitors and why,  if legacy banks hope to weather this storm, they must transform their business models and strategies.

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