The news: JPMorgan Chase is reportedly in late-stage talks to take over the Apple Card portfolio from Goldman Sachs, per The Wall Street Journal. 

What’s at stake: The Apple Card is a $20 billion loan portfolio. If it closes, the deal stands to connect one of the US’s most powerful banks with one of its largest technology companies. It also gives Chase a lucrative volume opportunity as loyal Apple fans use the cards to pay for repeated device upgrades.

What’s delaying the close? JPMorgan is still negotiating the price of the portfolio with Goldman Sachs, with a key sticking point being the subprime exposure.

As of March 31, subprime borrowers accounted for only 15% of JPMorgan’s credit card loans. By comparison, 34% of Apple Card users have a score below 660.

JPMorgan wants to buy the portfolio at a discount because of these metrics—even more so due to the Apple Card’s lack of late fees, a common tool to insulate lenders from losses incurred from delinquent borrowers.

Network skirmish: Also in the foreground of this deal is Visa and Mastercard’s battle to offer networking services for the Apple Card: Visa put $100 million on the table to coax Apple to switch from Mastercard.

Working with JPMorgan could make Visa’s bid more promising—while JPMorgan does issue select Mastercard credit cards, like the Freedom Flex card, most of its cards use Visa’s network. 

Our take: Apple needs a stable financial partner after a rough road with Goldman Sachs’ regulatory scrutiny and failed experiment with consumer banking. 

JPMorgan Chase could widen its lead over its competitors with an acquisition like the Apple Card. However, Apple won’t make it easy for the bank: The tech company is known for its dominant approaches in partnerships. 

• The WSJ reported that Apple is open to changing “key components” of the current Apple Card, which could let JPMorgan lay out terms that are preferable to the bank. 
• Apple will likely be forced to make some concessions to find an issuer willing to pick up the portfolio.

In the meantime, the high yield savings account linked to the Apple Card remains in the balance. Goldman Sachs still powers Apple’s savings product, and JPMorgan doesn’t currently offer a similar account that would let it easily also take over those accounts.

Chase and Goldman may not care to keep the two products integrated with each other and will likely have to hash out ownership of that program, and the logistical issues—UX design, customer service hierarchies—that would ensue if they decided to divorce the products.

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