This analysis was first published in SvD Näringsliv, in Swedish, on April 19th, 2023. This piece was translated from Swedish by Claude. Some phrasing may differ from a human translation.

Apple’s latest product isn’t a gadget — it’s a savings account. But the real threat to traditional banks is what the tech giant might do next. Because Apple, as usual, has several aces up its sleeve.

In a dimly lit, elegant restaurant in Palo Alto, California — at the heart of Silicon Valley — a major Swedish bank’s board and senior leadership are gathered. It’s the early 2010s, and the bank’s executives are in town to be inspired by digital technology and learn from it. The invited guests are local entrepreneurs with some connection to Sweden. I’m one of them.

The conversation turns to challengers in the banking and finance world. Apps are demonstrated, potential disruptors described. The bank’s board is not particularly impressed.

They reference a recent customer satisfaction survey. Customers are happy — therefore competition from new players is not a problem.

That’s the usual script. Among the headlines about “new challengers,” very few in practice actually challenge large and established players. Especially in heavily regulated areas like banking and finance.

Even Klarna — themselves a sort of challenger — recently dismissed the threat from Apple’s relatively new “buy now, pay later” feature. Klarna has many customer offerings and is established across its markets. There’s therefore no reason to worry, you could infer from the interview with CEO Sebastian Siemiatkowski.

When Apple launches a savings account in its mobile app for American customers, Swedish banks are therefore unlikely to be particularly concerned — despite the generous interest rate of 4.15%. They’re used to being able to write off new competitors as ambitious but irrelevant.

A savings account here or there probably doesn’t make much difference.

But it would be a mistake to underestimate what a company like Apple can do when it has decided to take on an industry.

Apple’s financial services are built in partnership with investment bank Goldman Sachs — which has itself had difficulties breaking into the more consumer-facing side of banking.

In January, Goldman Sachs announced that its consumer division had lost around 30 billion kronor since launch in December 2020. Given this, the relative calm among big banks is understandable — even a major bank from a different part of the financial sector appears to find it hard to compete on their home turf.

But Apple is not like other companies. Even setting aside its capacity for innovation, it has an asset that is difficult to compete with: a great deal of money.

A very great deal, in fact.

At the start of the year, Apple held over 210 billion kronor in liquid assets — plus around 350 billion kronor in securities. That’s roughly equal to the combined market capitalization of Handelsbanken, Swedbank and Danske Bank. There are resources to work with.

There is also a strategic ambition for growth, with Apple having identified financial services as one of its chosen areas. iPhone sales are stable but no longer growing the way they once did. Building out an ecosystem of software services to complement the hardware has therefore been CEO Tim Cook’s focus in recent years.

Apple Pay — the ability to pay by tapping your phone, with no physical card needed — is popular with users. It could be seen as something of a Trojan horse in this context. Customers are already paying with their iPhone. Which card handles the underlying transaction becomes, in that way, rather less important.

Apple also has something that the big banks neither have nor can acquire quickly — a brand that people actually like.

That became clear when the company finally opened the doors to its new store in Mumbai, India, drawing enormous crowds.

It’s also visible in surveys. Consulting firm Interbrand publishes an annual ranking of the world’s most valuable brands. Top of the list in 2022? Apple. The first financial name doesn’t appear until position 24, with bank JP Morgan Chase.

If we set aside Apple’s savings account and instead focus on the direction of travel, a picture emerges that should be more troubling for the financial establishment.

Imagine Apple acquiring Goldman Sachs’s struggling consumer division. They already work together. Apple could then integrate banking services and payments directly into the operating systems running across more than 1.8 billion active devices in the market.

They could offer exclusive deals to everyone who has — or buys — a new iPhone. And they do it with a brand that stands far higher in public esteem than any of the big banks.

Last but not least — Apple can afford to do it.

In fact, they can afford to lose money on this for decades. Because they have what no other bank has — entirely different revenue streams.

Core parts of the big banks’ business would, in this scenario, become something of a side benefit for a company like Apple. That is something worth feeling threatened by.