Many financial companies have been capitalizing on the high interest rate environment, promoting financial products like high-yield savings accounts and certificates of deposits with impressive interest rates. But here's a new one for you: iPhone maker Apple (AAPL -0.35%) is getting into the space, albeit in partnership with Goldman Sachs (GS 1.79%).
Here's a closer look at Apple's new financial product -- and why investors should care.
Building on an Apple credit card
In the summer of 2019, Apple announced a credit card in partnership with Goldman Sachs, who was the issuing bank of the card. Called Apple Card, the financial product offered 2% cash back to customers every time someone used Apple Pay to pay with the card, 3% cash back on purchases made at Apple stores, and 1% cash back on everything else. Other perks included unique privacy and security features such as the card number or CVV code not appearing on the physical card, and a titanium card design.
The card has been a success, earning high customer satisfaction rankings and contributing to rapid growth in Apple Pay usage.
The company added to its financial services earlier this year, when it announced a buy now, pay later product, partnering with Goldman Sachs and Mastercard.
Apple's new savings account builds on its growing suite of financial services.
Available to its Apple Card users, Apple's new high-yield savings account currently boasts an annual percentage yield (APY) of 4.15%. Or course, the rate may change at any time, Apple notes. While the savings account is Apple-branded and available to Apple Card users, it's offered by Goldman Sachs. In other words, Apple continues to outsource the banking aspect of its branded financial products. This, of course, is no surprise. After all, Apple is not a financial company.
The savings account, which Apple says currently boasts an APY that is "10 times the national average," is free of fees and has no minimum deposit or balance requirements. Further, cash rewards from the Apple Card can be set to automatically deposit into the high-yield savings account.
Overall, the savings account seems like a product that will enhance the attractiveness of Apple's foray into financial products.
Bolstering Apple's services segment
This new high-yield savings account shows how Apple continues to find ways to monetize its loyal customer base. Apple management has said its installed base of active devices is its "engine" for growth in its services segment. And Apple's services segment is becoming increasingly important to the company's overall business.
Apple's services segment, which largely represents revenue from third-party apps and Apple's own apps and services like Apple Music, Apple Pay, AppleCare, and more, saw revenue increase 14% year over year in fiscal 2022 to $78 billion. Apple's total fiscal 2022 revenue was about $394 billion. Management noted during its fiscal fourth-quarter earnings call that its services business has nearly doubled in size over the last four years.
The launch of yet another new service for users highlights how the tech company continues to take advantage of its large base of users. Management noted in the company's first-quarter earnings call for fiscal 2023 that its installed base of active devices has now crossed two billion -- double what it was only seven years ago.
"This is an incredible testament to our products and services and the strength of our ecosystem," said Apple CEO Tim Cook during the earnings call.
While Apple Pay, a credit card, a pay-over-time product, and a high-yield savings accounts are the company's main financial products today, there are likely more to come.
