The Apple Card is just a credit card (and not a particularly special one)

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Playing cards

Imagine, if you will, a credit card designed for online use, streamlined for digital use and stripped of unnecessary physical features.

I’m talking, of course, about Citibank’s ClickCredit card, introduced 20 years ago.

“It’s a totally new kind of payment tool, designed for the virtual world,” Antony Jenkins, the bank’s director of online initiatives, told IDG News at the time.

You can imagine my patented I’ve-seen-this-all-before eyeroll when Apple made carbon-copy promises about its new Apple Card two decades later. It has a security chip, like most modern credit cards, which wasn’t available when ClickCredit rolled out, but it also has a magnetic stripe, which no less an authority than Apple CEO Tim Cook has called “outdated and vulnerable.” ClickCredit did away with the stripe, anticipating a shiny future where e-commerce was everything.

The Apple Card is in the news now not for its spiffy new features but because famed programmer David Heinemeier Hansson complained that his wife, Jamie, was given a tiny line of credit on her Apple Card. Jamie Heinemeier Hansson noted that she has a higher credit score than her husband. A customer service representative blamed an “algorithm.” Apple co-founder Steve Wozniak said that he and his wife experienced a similar discrepancy in the credit lines they were granted.

This isn’t Apple’s fault, though. Look to Goldman Sachs, the issuer of Apple-branded credit cards, which replaced longtime partner Barclays this year. For its trouble, Goldman (which has publicly denied any discrimination) is now being investigated by the New York State Department of Financial Services.

Plenty has been written about algorithmic discrimination, which is just as wrong as any kind of discrimination. But I think waving our hands about “algorithms” — which in this case is just credit scoring, a well-understood and long-established process in the financial world — obscures what happened here.

Apple wanted more control over the Apple Card in terms of its integration with the iPhone and Apple’s software. To gain that, it went with Goldman Sachs, which is a long-established commercial bank but a complete newbie to consumer credit. No one should be surprised if Goldman is making beginner mistakes that Citi, Chase and Bank of America have sorted out over decades of experience. Hopefully the scrutiny of regulators will make Goldman’s credit card managers fast students.

I am reminded of Apple’s experience with the iPhone. To get more control over the phone, Steve Jobs negotiated with what was then known as Cingular —now AT&T Wireless — for an exclusive deal in exchange for an unusual amount of autonomy in hardware and software design. Apple even insisted on designing the radio, which explains why the early iPhone was infamous for dropping calls.

Consider these allegations of sexist credit limits the Apple Card’s dropped calls. AT&T’s experience with Apple should be telling: Within a few years, Jobs wriggled out of the exclusivity deal, having learned a lot about wireless networks and gaining leverage to force other carriers to accept its terms.

The Apple Card is just a way for Apple to get deeper into the credit card business, using Goldman just as long as it needs to. Its real goal — if history is any indication — is to get the big, established credit card issuers to adopt its new security and privacy features. (Maybe they’ll use more mature credit systems, too — ones that don’t make newbie mistakes that land them in trouble with regulators.)

At that point, any card could be an Apple card. Heck, maybe Apple should talk to Citi about issuing one, since it has 20 years of experience with virtual cards.

They can call it iCredit.

— Owen Thomas, [email protected]

Quote of the week

“You’re f—ing with the magic.” — Viacom CEO Mel Karmazin to Google’s co-founders on their ideas for advertising in 2003, according to the Correspondent

Coming up

Dreamforce, that annual exercise in people feigning helpless ignorance about what Salesforce does as 170,000 flood the streets of San Francisco, starts Tuesday. (In case you’re genuinely confused, here’s a primer: Businesses need software to operate. Salesforce provides much of that software. If you’re a consumer, you almost certainly don’t pay Salesforce for its software, but you also probably work for or shop at a business that does.)

What I’m reading

Judd Legum reveals that Facebook’s top media liaison, Campbell Brown, has a news site that has been bashing Facebook critic and Democratic presidential candidate Elizabeth Warren. (Popular Information)

Catherine Ho digs into Juul’s plan to cut spending and lay off workers amid widespread crackdowns on vaping. (San Francisco Chronicle)

Keach Hagey and Vivien Ngo offer a visual explainer of Google’s dominance of the online advertising market. (Wall Street Journal)