It was meant to be the bright, transparent alternative to the murky, old-fashioned world of credit card companies. When Apple launched its much-vaunted Apple Card in America back in August there was a tremendous surge in applications for the new product.
A month into its launch, Bloomberg reported that the card had already amassed some $736m in loan balances. That’s a drop in the credit ocean compared to the big banks, which all count their credit balances in the billions. But for a credit card that was barely a month old it confirms a very successful launch and points to a bright, long-term future.
Initial launch ads worked hard to distance Apple’s product from the established banking category. This, the ads stated, was “a new kind of credit card. Created by Apple — not a bank”.
In truth, working with partners Mastercard and Goldman Sachs, Apple really has put together a differentiated credit card offer. On top of the potent combination of Apple’s brand equity and an enormous brand-loyal customer base, the accessibility of applying and being approved for the card almost instantly via any existing iPhone drove significant signups.
The Apple Card also avoids complex rewards programmes and immediately rebates 3% of spent cash back onto the card. Rather than a clunky fixed credit limit, the card assesses user credit histories to provide a customised spend limit and associated interest rate.
More diligent customers get more credit and better rates, riskier ones get less and pay more for the privilege. And, no surprise, the software used to drive the credit card’s user experience on iPhones is genuinely ahead of the typical banking app.
The contrast between what Apple promised and what it subsequently delivered certainly undermines its brand position.
But last week Apple started to experience issues with its new product. Trouble had been brewing for a while because substantial numbers of Apple customers had been rejected for the card when they applied. This is not unusual, of course. But the hype surrounding Apple Card had built up anticipation among Apple loyalists.
That extended period of anticipation, combined with the almost immediate rejection experience that subsequently occurred, was met with incredulity and anger from many Apple customers.
Twenty years ago, Steve Jobs looked hard at launching an Apple credit card but ultimately passed on the idea because he was uncomfortable with rejecting any Apple customer. The company he founded is still, apparently, concerned by this issue and has been pressuring its partner Goldman Sachs to accept as many customers as possible, and to use lower credit limits to control for the risks associated with these higher approval levels. But even with that higher acceptance rate, a significant number of Apple’s customers have been rejected and they are extremely unhappy about it.
Nothing wrong with saying no to some customers. In fact it will probably engender further desire for the brand among those that could not get an Apple Card, and greater appreciation for those who did pass the entry test.
But a more serious issue was just around the corner. Last week a tech entrepreneur called David Heinemeier Hansson tweeted his disgust because although both he and his wife were approved for an Apple Card, he was granted a credit limit 20 times larger than his wife’s. This despite the fact they share the same credit history.
The @AppleCard is such a fucking sexist program. My wife and I filed joint tax returns, live in a community-property state, and have been married for a long time. Yet Apple’s black box algorithm thinks I deserve 20x the credit limit she does. No appeals work.
— DHH (@dhh) November 7, 2019
“My wife and I filed joint tax returns, live in a community-property state, and have been married for a long time,” Hansson explained on Twitter. “Yet Apple’s black box algorithm thinks I deserve 20x the credit limit she does.”
Hansson’s Twitter rant quickly went viral and then things grew exponentially worse with the subsequent involvement of Apple’s co-founder. Steve ‘Woz’ Wozniak had a similar experience with his own Apple Card application. While Woz was immediately approved, his credit limit was 10 times that of his wife, despite their shared assets and income.
The same thing happened to us. I got 10x the credit limit. We have no separate bank or credit card accounts or any separate assets. Hard to get to a human for a correction though. It’s big tech in 2019.
— Steve Wozniak (@stevewoz) November 10, 2019
Woz was very unhappy with this outcome and, unlike many brand loyalists who pointed the finger at Goldman Sach’s to explain the apparently inequality of the situation, Woz made it clear that the blame should be laid at Apple’s doorstep.
Dumb AI
The problem at the heart of all of this is artificial intelligence – or what less digitally deluded marketers refer to as ‘a computer programme’. Despite much-vaunted conference claims about how AI will drive pretty much everything in the future, several unfortunate ramifications of AI rarely get a mention.
The main issue, which Apple is discovering, is that AI pays no regard to equality and diversity. In fact, many AI-driven decisions can often appear to be downright discriminatory. Obviously, computers aren’t capable of sexism or racism but they can pick up on incorrect data flags or be driven by other ‘lurking’ variables to prioritise certain sub-groups over others.
In a recent case, for example, a disproportionate number of Native Americans were blocked from opening accounts on Facebook. The cause? Not some deep-seated digital racism. The AI used to review applications misinterpreted Native surnames like Browneyes and Lone Hill as invented identities and dinged them from the system.
Marketing professors Catherine Tucker and Anja Lambrecht have explored several examples of AI-induced discrimination. In one example, a programmatic advertising campaign designed to promote science, technology, engineering and maths jobs ended up targeting a disproportionate number of men at the expense of young women, who were already under-represented in these jobs.
Again, the apparent discrimination did not occur because of some gender stereotyping deep within the microprocessor chips but because the relative cost of targeting young women was prohibitive. The programmatic system detected the price imbalance and the relative value of targeting men over women and swung its media buying increasingly towards cheaper, more available, male audiences.
“We turn to the past to find data. But if you’re not careful, the algorithms learn the mistakes of the past,” Chris Nicholson, the CEO of AI firm Skymind, recently explained. “Algorithms that learn from history are doomed to repeat it. That’s the great irony. You have to really work to correct for the mistakes of the past. In life and in algorithms.”
Why are marketers kidding themselves that AI is about more than sales?
And Apple is experiencing an additional downfall from its dependence on AI. As furious customers call Apple to complain about being rejected or receiving a relatively small credit limit, the Apple service team are unable to offer an explanation or advice. Despite an extensive training programme to prepare Apple teams, their ultimate response is to shrug and explain: “It’s just the algorithm.”
It’s a response barely above that of the infamous ‘Computer says no’ sketch from Little Britain. And just like the in the comedy series, the response has further inflamed the situation for customers and generated tension for Apple employees, who aren’t used to irate customer service encounters.
There is no do doubt that the saga has also done some damage to Apple’s brand image. Any company that apparently exhibits sexism or racism in 2019 is bound for, and deserves, reputational censure. But Apple’s brand strength and the clarity of its brand position mean that the company will suffer more than its partners as a result of Apple Card’s issues.
When the card was launched the company claimed that it “represents all the things Apple stands for. Like simplicity, transparency, and privacy”. Clearly many consumers have experienced the direct opposite with Apple Card. The process has been complex and murky and the contrast between what Apple promised and what it subsequently delivered certainly undermines its brand position.
Despite that damage, it is important to avoid the usual claims that Apple’s brand equity and its long-term success will be threatened by its recent issues with the new card. This is a classic example of a brand extension. That means there is enough perceptual distance between the core categories that Apple usually operates in and this newly entered one to avoid any major issues.
Ferrari sells some pretty crappy cameras and aftershave but, thus far, no-one has been dissuaded from buying that new £300,000 sports car because the button on their £100 camera has stopped working.
If Apple made a crap Macbook or an iPhone that performed poorly there would be far more risk. While Apple Card has made a significant proportion of Apple customers unhappy and created a sudden set of contradictory messages around the brand, it’s not going to do too much harm.
It would be hard to find a deeper reservoir of brand equity than Lake Apple. The company can afford to piss a few litres of it out of the reputational window and hardly even notice the loss. And once Apple sorts out its wayward algorithms, a new and potentially gigantic source of revenue is up and running.