Open Letter to Tim Cook - Apple and Financial Services

Dear Tim,

For many years, I’ve watched Apple’s relentless obsession with refinement create products that are focused, responsive, and sophisticated. This consistent application of corporate values has led customers to bestow upon Apple what may be their most valuable gift: trust.

Establishing trust isn’t simple. Products that we rely on must have a “trust stack” with security as the foundation. Right above security lies privacy, and then, as I have argued previously, identity. Above those are control and then, finally, communication. Each is vital to building and maintaining trust, and each has been a preoccupation of Apple’s.

How can Apple best use this trust? I suggest the answer is financial services. Apple has always been willing to take on back-end complexity to simplify the user experience, including in financial transactions. But facilitating financial transactions doesn’t go far enough. Apple has an opportunity to profoundly transform our relationship with money.

An ability for Apple able to hold and lend funds will become the platform for innovation. Consider the simplicity of just two interest rates. One for money I have on deposit, and the other for money I am borrowing. Intervals would be calculated precisely, so the moment I deposit my paycheck or other funds, I start getting interest. If I have a home loan or use my Apple credit card, I pay interest. Those interest rates will change, and if I trust Apple to set them appropriately and transparently (including a profit, of course) they could change often, even continuously.

But this is only the beginning. Today, I grant direct access to my accounts for utilities, credit cards, subscriptions, and more, each of which has a distinct and cumbersome way to manage that access. This could and should be unified and under my control. There are so many areas that are ripe for new thinking in every aspect of our financial life.

Of course there will be obstacles. Working through credit card issuance, home loans, bill payment, student loans, perceived and actual competition with other financial institutions, reporting, etc., all require significant scale and resources, which is exactly what Apple is capable of providing, and in doing so, set itself apart from others that are focused on only one part of the opportunity or are massive incumbent players institutionally incapable of making such significant changes.

It may make sense to acquire a financial institution to gain experience and reduce the time to regulatory approval. As a candidate for acquisition, I naturally think of First Republic Bank (NYSE: FRC) for their sincere and effective focus on customer service. It doesn’t hurt that they have a really good iPhone app. (I am a customer but have no other relationship with them.) 

Financial institutions will be changing over the next few years. Apple can advance the rate of that change and transform the financial industry for good. This is an opportunity with benefits for all of us.


Larry Zulch