Apple-Goldman Sachs Credit Card: A Study in Companionship
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With your money briefing, I'm J.R. Whalen at The Wall Street Journal in New York. The new credit card soon to be rolled out by Apple and Goldman Sachs is being watched very carefully by Silicon Valley and Wall Street to see just how well the tech and finance worlds can get along. We'll explain in a moment. First, these money and market stories you should know. Data from the Bureau of Economic Analysis shows that U.S. workers' income has not been keeping pace with scarce labor and unemployment levels at a 50-year low. The Bureau says that employee pay and benefits as a percentage of gross domestic income fell to 52.7% in last year's third quarter for the fourth straight quarterly decline.
What is the Apple–Goldman Sachs credit card and why is it getting attention?
It was as high as 57% in 2001 and even 59% in 1970. Now, while the labor share has fallen, business profits are quite healthy. Income of corporations, proprietorships, landlords, and other businesses have climbed from less than 12% of GDP in the 1980s to more than 20% today. The Wall Street Journal Outlook column points out the numbers reflect a decades-long trend that has coincided with stagnant middle-class incomes, also lower union membership, and increased global trade. While corporate profits benefit some households in the form of dividends and higher stock prices, wages are the biggest source of income for most Americans, meaning that wealth is being distributed more unevenly than before.
And if you've been forking over more cash for things like avocados, olive oil, and nuts, you can thank consumers' newfound love for monounsaturated fats, what some call the good fat. In fact, since 2013, average prices have climbed as much as 60 percent. Same goes for salmon, which is full of omega-3 fatty acids, another form of healthy fat. The Wall Street Journal's Lucy Kramer writes, from Mexico to Norway to New Zealand, avocado growers, fish farmers and butter producers are struggling to increase output so they can meet surging demand. But environmental constraints and other challenges are limiting how much they can churn out. As an example, salmon need very clean water with the right amount of oxygen in a specific climate which limits where they can be grown.
See the full story at WSJ.com or the WSJ app.
Silicon Valley and Wall Street are closely watching plans by Apple and Goldman Sachs to roll out an Apple credit card that will ultimately help iPhone users manage their money. There's a lot at stake here, and Wall Street Journal reporter Peter Rudiger is here to explain. So, Peter, in the story you co-wrote in the journal, you mentioned the messy collision of finance and technology. Both companies here have a lot to gain, but this can also be a thorny path.
Tech companies, especially some startups in the Valley, often are tagged with the mantra of they like to move fast and break things. Banks and financial companies are very highly regulated so that they don't move fast and break things. So any partnership between the two, if a tech company wants to do something in financial services, they usually need a bank or another financial company to help them move money, to help them lend money to their customers, to help them store money. And because of that, each one of those points needs to be negotiated pretty thoroughly.
Apple brings a broad and loyal customer base to the table here, and Goldman has wanted to venture further into consumer banking. And Goldman is spending an enormous amount of money on this venture.
That's right. We reported last week that internally some of their initiatives to build things like customer call centers for if you have a problem with your Goldman Apple credit card to call in to just building an internal payments network to help move money around is going to cost Goldman around $200 million to build. Mm-hmm. And that's because they just haven't done anything like this before. If you think of other big banks in the country, JPMorgan Chase or Bank of America or Wells Fargo, they have been consumer banks for decades, if not more than 100 years. Goldman Sachs just got into this business in 2016.
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