Apple Savings Account: A Wake-Up Call

In April 2023, Apple announced the launch of the Apple Card savings account in partnership with Goldman Sachs. And if reports are to be believed, it racked up deposits to the tune of almost $990m and 240,000 accounts in less than a week. Apple started making inroads into the financial services sector with Apple Card, which facilitated payments on Apple devices. It quickly expanded into core banking businesses like savings accounts and deposits, with an overwhelmingly positive customer response. For traditional banks across the world, this is yet another reminder of the unprecedented threats from new competitors, and if they hope to weather out this storm, they must transform their business models and strategies.

While big tech organisations venturing into the financial services space is not new, let’s look at the reasons for the resounding success of the Apple Card savings account. To begin with, it is the Apple brand – one of the most valuable ones in the world with a huge following. Then there is the prevailing market context around the time of its release. The American financial market is reeling from the collapse of the Silicon Valley Bank, with significant uncertainty about recovery and the future growth path. Inflation is at an all-time high and with an impending economic recession. Amidst this, Apple is offering a savings account with a high-interest rate of 4.15%, no fees, and no minimum balance requirement. And it is extremely easy to use, with the existing Apple wallet serving as the banking interface. This demonstrates the fundamental shift in customer mindset and that customers are willing to trust brands outside of the financial space if they offer benefits that traditional banks don’t.

The modern customer now values ease of use, convenience, hyper-personalised offerings, and relationship-based engagement. They want to be able to access their banking platforms whenever and wherever, not just for payments but for other financial services as well. In fact, embedded finance is expected to reach $230bn by 2025. Consequently, customers are open to trying out new banking options made available by companies like Apple.

The other factor to keep in mind about customers is the changing demographics. Younger people are entering the formal banking economy, and they bring with them a greater demand for innovation and convenience than previous generations. Millennials and Gen Z are not shy to express their demands for Uberised services, available at the click of a smartphone. They are brand conscious, and the brand image and positioning matter to them. They also hold the brands they engage with to high ethical standards. Diversity, inclusion, sustainability, and ethical practices are critical considerations for these customers. With its cult-like following and reputation for paradigm-changing innovation, Apple has long held aspirational status amongst younger people.

Does this shift in customer priorities ring a death knell for traditional banks? Not at all. Banks now have the opportunity to transform themselves to meet the demands of the modern customer. Technology, of course, is a crucial driver of this transformation, but banks must now look beyond merely digitising operations to transforming their brand image and having an appetite for innovation. New business models, new offerings, new modes of engagement and transactions, and a focus on building a strong brand image are crucial at this juncture. They must explore symbiotic partnerships with fintechs and even technology giants to offer embedded finance and Banking-as-a-Service (BaaS) models that can deliver comprehensive, personalised and innovative solutions to customers. And they must leverage the emerging API economy to become orchestrators of a banking ecosystem comprising financial and non-banking partners who can meet all customer requirements with their portfolios. Through it all, banks must make concerted efforts to ensure their brand is not lost in the ecosystem. A completely reimagined approach to banking can help them create a brand presence that resonates with younger generations.

Of course, all transformation and new strategies must be built on a solid foundation of hyper-personalisation. To do this, they must break down organisational silos to access and use customer data collected from across touchpoints that will help them understand the complete relationship and value of the customer. This will then form the basis of hyper-personalised offerings ranging from pricing to offers and bundles, and loyalty and rewards. It will also be the main driver behind any ecosystem that the bank orchestrates.

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To enable this, banks need a technological foundation that is agile, scalable, and powerful. Unfortunately, existing legacy core systems that many banks operate cannot support these new banking models or even carry out effective analytics for personalisation. Transforming the core can be highly risky, time intensive, and expensive. But the good news is that banks don’t need to overhaul the legacy core completely; instead, they can partner with a specialised technology provider who can deploy a robust cloud-based middleware platform over the core systems. Such a platform can help banks leverage AI and ML to analyse customer data for effective personalisation and can also help them roll out new business models.

Traditional banks still enjoy considerable customer trust and hold reams of customer data. Now is the time for them to cash in on both these advantages to usher in a new, modernised banking approach that puts the customer and their needs at the heart of their strategies. Further, as Apple’s success proves, customers want convenient, personalised, and easy-to-access banking options. Banks must focus on innovation-based value creation. If traditional banks can offer this coupled with the security and reach that they already have, then they can be assured of long-term growth, profitability, and competitive success.