A Huge Credit Card Disruption Is on Its Way, But How Big Will It Be?

The banking industry is acutely aware that it is going to have to adapt in order to attract and retain new customers as Millennials enter the work force. But according to the results of a survey cited in a recent online Forbes article, the challenge is far more daunting than it appears. Especially with regard to credit cards. 

Being the first generation never to use anything analog, Millennials already have their favorite digital brands. Given their preference for the iPhone, and the apps they download to do interact with the outside world, it should come as no surprise that 24 percent of young Millennials and 22 percent of older Millennials report that they intend to apply for the new Apple Card. After all, the draw of the Apple Card is that holders will be able to use it on their iPhones (and even Apple Watches) in tandem with Apple Pay. Predictably, the survey found that the more analog experience cardholders have the less likely they’ll be interested in the Apple Card. Only 14 percent of Gen Xers and 7 percent of Baby Boomers plan to sign up. 

But here’s the kicker: 20 percent of all these impending Apple cardholders do not hold any other credit card at present. In other words, the lure of the Apple Card is going to significantly expand the pool of credit card holders.  

But the Apple Card is also going to be a huge disruptor for veteran credit card operators and their issuing banks, many of which are going to pay the price. Assuming the stats above ultimately translate into plastic, Apple will quickly capture the second-highest market share among young Millennials (behind Capital One) and the third-highest market share among older Millennials (tied with American Express, and behind Capital One and Bank of America). The banks that stand to be the hardest hit by this demographic shift are Wells Fargo and US Bank, since about 25 percent of their current cardholders expect to apply for an Apple Card and use it as their default payment option. American Express and Bank of America will see their revenue drop almost as much, since 20 percent of their cardholders say they plan to apply for the Apple Card, among whom 50 percent of them will use it as their default payment option. 

If all of this actually happens, veteran card operators and banks will have to work double time to develop and implement the type of value-added digital services that can convince Millennials to take a good look at their products as well. Of course, none of this may not pan out as anticipated. But what if it does? After all, who would have envisioned back in 1976 that two geeks working out of the Jobs family garage in Los Altos, California would ever be able to disrupt anything?