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Goldman-Apple Deal Has Card Giant’s CEO Questioning Payoff

Jenny Surane

(Bloomberg) -- Goldman’s partnership with Apple could pay off, but getting there may be costly.

As Goldman Sachs Group Inc. works toward debuting its new credit card with Apple Inc., the rest of the card industry will be keeping an eye on the bank’s progress, said Margaret Keane, chief executive officer of Synchrony Financial, the largest provider of store credit cards.

“There were a lot of us” bidding to be Apple’s partner, Keane said Friday at the Bernstein Strategic Decisions Conference in New York. “We’re all going to watch and see what happens.”

The new Apple Card will offer users a cash-back rewards program, including 2% back on all Apple Pay purchases made with the card and 3% on purchases made at the Apple Store or with services like the App Store. Goldman and Apple also will encourage users to regularly put money toward their card debt through weekly or biweekly payments.

“The reality is it’s a startup -- they’re starting from scratch,” Keane said. “When you’re doing startups, by the way, there are a lot of upfront costs you have to put up just from pure marketing and set-up perspectives. So you have to make sure you’re doing these deals at the right returns. So we’re not going to win every deal, nor would you want us winning every deal.”

Goldman Sachs has touted its new interest in consumer lending as an advantage, noting it doesn’t have many of the same legacy costs as its incumbent competitors. The company declined to comment on Keane’s remarks, instead saying in an emailed statement that it’s “thrilled to partner with Apple” and that it’s seeking “to disrupt consumer finance by putting the customer first.”

Rich Deals

Last year, Synchrony announced that Walmart Inc., one of its largest partners, had opted to move its portfolio of cards to Capital One Financial Corp. Since then, Synchrony has renewed agreements with three of its of largest card partners: Lowe’s Cos., J.C. Penney Co. and Walmart subsidiary Sam’s Club. PayPal Holdings Inc., meanwhile, has taken Walmart’s spot on the list of Synchrony’s five largest partners, based on interest and fees from loans.

Synchrony also faces fresh competition from startups seeking to give consumers easy access to personal loans at retail checkout. In response to a question about new competition from Goldman’s consumer-lending unit Marcus as well as GreenSky Inc. and Affirm Inc., Keane said that many of those ventures are still fairly small and “many of them have not been tested” by an economic slump.

“Look, we need deals that make sense,” especially with a potential downturn coming, Keane said. “When you’re underwriting deals today, you have to anticipate that. And when you look at some of the deals that are being done, they’re very rich.”

(Updates with Goldman’s comments in sixth paragraph.)

--With assistance from Sridhar Natarajan.

To contact the reporter on this story: Jenny Surane in New York at jsurane4@bloomberg.net

To contact the editors responsible for this story: Michael J. Moore at mmoore55@bloomberg.net, Daniel Taub

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