When Steve Jobs announced a new product or feature, he never was shy about using big words. Compared to Jobs, the iGod who ended many of his speeches with the phrase "one more thing," his successor, Tim Cook, tends to be less theatrical. When in March he introduced the new Apple Card with atypical drama as "the most significant change in the credit card experience in 50 years," people expected greatness.
What we know: Banks and credit card issuers are not the only ones watching Apple's every move in the financial sector; the business travel industry is also looking to Cupertino because, while many business travellers are loyal Apple fans, an even larger number of travellers would rather do without breakfast than smartphones. What will we be seeing this summer when Apple's in-house payment service, Apple Pay, is extended to include the Apple Card?
First of all, the Apple Card is a credit card — 8.56 cm long and 5.398 cm wide — as we have known credit cards for decades. To manage integrating the card into its world, Apple will largely rely on established card infrastructures. The Apple Card was developed in cooperation with Goldman Sachs and operates in the Mastercard network. In addition, the interest rates and fees applicable to the card correspond to those typical in the US market.
The differences between the Apple Card made of titanium and your run-of-the-mill credit card become apparent at second glance only. The Apple Card does without many of the features of credit cards as we know them: it only has the name of the cardholder printed on it and comes with an embedded chip — that's all. It does not have the traditional magnetic strip or a contactless EMV interface, let alone a printed credit card number. Also, you would look in vain for a three-digit security code because the Apple Card uses Apple Pay for NFC authentication which means it works with a face or touch ID and transmits payment data via tokens and cryptogram technologies.
Not many new features, just a lot of cool ones
However, as with many other Apple products these features are not genuinely revolutionary. We have known apps that offer overviews of expenses and have seen them in wallets for some time now, especially since 2014 when tokenization (technology that facilitates the secure storage of cards and pertaining data in a digital wallet) made its way to smartphones. Apple was driving the dovetailing of digital wallets and Apple Pay at that time as well.
When it comes to coolness, Apple does a lot of things right. The design and materials are appealing and the usability of Apple Pay — into which the card is integrated — is extremely customer-friendly. However, that does not really come as a surprise either; most Apple customers think digital first and listen to music, shop, or are entertained digitally and, of course, Apple customers are open-minded when it comes to digital payment processes.
No home in business travel
With Apple Pay and the Apple Card, smartphone giant Apple mainly caters to private consumers whose expectations naturally differ from those of business travellers or travel managers. Travel managers, for example, are less interested in knowing whether the Apple process runs smoothly; they want to confirm that the end-to-end process is reliable and undisrupted for their travellers. In other words, travel managers want to know that the payment process is integrated into the chain of services including booking, fulfillment and expense reporting. They also want to know that the payment process runs on (mostly Microsoft Windows based) company computers as well as smartphones and whether they can authorise payments through Apple Pay in a targeted manner and for specific purposes, for example, by generating card numbers for one-time use.
Business travellers are not looking for payment experiences
Travel managers will not find answers to these questions in Cupertino but can get them from our expertise as providers of travel payment services because we started exploring secure digital payment, full cost control, and detailed analysis options a long time ago — topics found today, with or without Apple, behind the buzzword "virtual cards" and that play a major role in the business travel industry. For business travelers, the best payment experience is one they don't have. NOT paying is better than paying conveniently. Payment processes that do not involve the traveller's personal account do not entail any time-consuming settlement of expenses, input of personal data, or overdraft interest. Smart corporate payment eliminates payment processes for travellers. That is not just a vision anymore — virtual cards have made it possible.
For example, we at AirPlus currently are piloting the Budget Card in cooperation with select corporate customers. Our Budget Card is a physical plastic card that can be used wherever digital wallets are still unknown and not accepted including when checking in at some hotels and in countries with less developed payment infrastructures. We know from experience that the new plastic card should be equipped with the usual features, such as the name of the cardholder and a magnetic strip to ensure acceptance. What good is a wallet and/or card to a frequent traveler if it is accepted by 95% of merchants but the remote hotel where he or she is staying falls under the remaining 5%? What if the merchant pulls an imprint device from a drawer but it only works if the cardholder's name and card number are embossed on the card? At this hotel the Apple Card will be out of its depth.
Also important is that over the past few years no product category in travel payment has grown as quickly as virtual cards. According to Yahoo Finance, the virtual card market was $85 billion in 2015. In 2018 the market grew to $160 billion. By 2024 it's predicted that the virtual card market will balloon to $500 billion.
We all benefit from the Apple Card
Apple Card will not be a competitor to existing business travel payment solutions even though when it is launched our industry will experience even more pressure to innovate. First and foremost, the introduction of the Apple Card will drive the discussion about how virtual and physical credit cards are growing together. This discussion will benefit all innovative providers, not just Apple. In summary, Apple is by no means the first mover with regard to this new technology, but it is the first to manage to popularise it. This is why no bank or credit card company can afford to dismiss the Apple Card. At the end of the day, the Apple Card will contribute to the credit card's elimination of itself because the future belongs to virtual payment.
Who knows, perhaps next time the business travel industry will be the one launching "one more thing" in travel payment.