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Alex Ossola: Welcome to Tech News Briefing. It's Tuesday, December 5th. I'm Alex Ossola for the Wall Street Journal. I'll be filling in as host for the next few months while Zoe Thomas is away on parental leave. I'm so excited to be with you.When Apple and Goldman Sachs teamed up to launch the Apple Card in 2019, it was a big deal. But four years later, Apple is calling it quits on the partnership. Our reporter, AnnaMaria Andriotis, joins us later in the show to talk about what went wrong and what that means for both companies' futures.But first, Meta Platforms and IBM have launched a coalition of over 50 AI companies and research institutions called the AI Alliance. The coalition says it's pooling resources to stand behind quote, "open innovation and open science." Here to tell us more about what this could mean for AI development and a fast-growing market is business and technology reporter Belle Lin.So Belle, what is the goal of the AI Alliance?
Belle Lin: So the AI Alliance, in their words, is really trying to promote this idea of open innovation and open collaboration in this really important technology, AI or generative AI. And essentially, they want to say that they're doing all this in the open, as compared to these closed or proprietary systems that a lot of us know by now, namely OpenAI and some of their competitors like Anthropic and Cohere. And so the idea is that by collaborating with academia, with research institutions, that some of these leading companies, including Meta and IBM, are doing this sort of development out in the open.
Alex Ossola: Got it. You mentioned a couple of the members, but can you tell us who some of the big players are here?
Belle Lin: Yeah, it's a pretty wide array of members. So you've got some of the heavy hitters from the consumer tech space, namely Meta, and then you've also got the kind of business technology vendors that a lot of corporations come to rely on for their critical business software. You've got ServiceNow, Dell, and also you've got on the hardware side, namely AMD, which is a pretty big chipmaker that, this coming week, has a lot of announcements around how essentially they're competing with Nvidia, which has really been the dominant chipmaker for powering these AI systems.And then on the academic side, there's also some big names including Cornell, Yale and also the National Science Foundation, CERN, and so pretty wide array of academic research, as well as consumer and tech giants.
Alex Ossola: Let's talk about who's not in it. Who are some of the names that jump out at you as being off of that list?
Belle Lin: Yeah, the big company not represented here is OpenAI, which has been obviously in the headlines in recent weeks because of its leadership upheaval. And so if you kind of read in between the lines of what this alliance is doing here, you can kind of see that this coalition of players, and a lot of them are open source companies, too, are trying to say that, "Hey, we have this really great alternative that is developed in the open. It's responsible, it's safe, and it's not OpenAI."Some of the other companies that aren't included are also some of the major cloud vendors. Microsoft, Amazon, and Google aren't in there. So the overall message is trying to say to the market and to businesses, "Hey, we're here and we're working together and we're a really good option that's not OpenAI and not Microsoft."
Alex Ossola: So is the intention to take on OpenAI and Microsoft and actually create a competitor to those companies?
Belle Lin: So the intention isn't formally to say all these companies will work together and bring to market like a software or a new solution. They're really working in collaboration in this kind of like open scientific sense. So it could very well be that some of the businesses end up working together commercially to bring solutions to market for businesses.
Alex Ossola: Tell me a little bit about timing. OpenAI has been really dominating this conversation around generative AI for a little over a year. Why launch this coalition now?
Belle Lin: The timing was pretty curious in that just a couple of weeks ago, we had the whole upheaval around OpenAI and it reignited the conversation for businesses to diversify the AI vendors that they were working with. That they can't just rely on OpenAI and that's a risk.And so I had asked this question of some of the companies that I spoke with and across the board they said that it wasn't tied to the OpenAI announcement, but it was just a fortuitous moment for them to reinforce that they are compelling alternative to what OpenAI and other closed systems offer.
Alex Ossola: So what can we expect to see next from this alliance?
Belle Lin: So what IBM has told me is that they are working on two areas in the very near term in the next few months. One is around developing benchmarks for AI safety and validating some of these AI models. And the second, which is pretty pressing in their view, is on AI regulation. So they expect to release papers and perspectives that kind of present their more open view of where they think regulation should be going.
Alex Ossola: That was our business and technology reporter, Belle Lin.And a quick note. You might remember we ran a poll not too long ago asking for your thoughts on what the show should sound like moving forward and the message came back. You want lots of tech news quickly and discussions that dig into big tech-related issues.So we've made a change. We'll be bringing you two episodes a day, an in-depth episode like this one and a quick news roundup to close out the day. Let us know what you think. Drop a line to tnb@wsj.com. That's tnb@wsj.com.Coming up, what could the end of Apple's credit card partnership with Goldman Sachs mean for Apple Card users? That's after the break.Four years after launching, Apple is pulling the plug on its credit card partnership with Goldman Sachs. When the companies teamed up to launch the Apple Card in 2019, it was a huge deal for both Apple and the Wall Street bank and for the credit card industry at large. The split has big implications for Apple's future in payments and for Goldman's consumer business. Joining me now to talk about it is Wall Street Journal reporter AnnaMaria Andriotis.AnnaMaria, let's start with some of the basics about the Apple Card. What's special about it?
AnnaMaria Andriotis: So the credit card was different for a number of reasons. It charged no fees. It pays daily cash rewards and it syncs with consumers' iPhones to basically analyze their spending.These features were a big deal when the card was first announced. It was also a big deal that Apple, this tech giant, which had ambitions to get bigger and bigger in payments, was now coming out with its own card.Up until that point, Apple was most well-known in payment for having Apple Pay, but in most cases what that meant for people was that they were loading their credit cards, their debit cards from their existing bank issuers. Now here came this card from Apple that was a much fancier, let's call it, version than a prior one that it had with a different bank, and it was partnering up with this massive Wall Street firm that was, for Goldman Sachs, this was its first step into the credit card world.
Alex Ossola: 2019, this partnership launches to much fanfare. How has it gone since then?
AnnaMaria Andriotis: It depends on who you ask. Certainly for Apple, look, this has been a popular card. From sort of the public appearance standpoint, seems like it's worked out quite well.For Goldman, the story has been a lot more complex. When Goldman launched the card, it was a really big deal and it was viewed as a massive success at Goldman. As the years have gone on, that point of view has shifted.I remember when it was first announced that Goldman got the deal hearing from credit card executives, contacts of mine, sources in the sector. At the time I was covering the credit card space and I was being told, "Oh my God. Yeah, we were in the running for it. And the financial arrangement, the economics essentially, that Apple wanted from this deal were just something that we could not get on board with." So "Good luck to Goldman" was basically what I was hearing.
Alex Ossola: Like what? What were some of the terms of the agreement that other banks couldn't get on board with?
AnnaMaria Andriotis: Number one, Apple wanted pretty much everybody to get approved. That's not so uncommon. There are big credit card partners out there, big stores and other types of merchants that want that. But when that happens, what the bank partner is looking at is the potential for higher loan losses, like more people not paying their bills.Another thing, the way that Apple wanted and did arrange for the billing statements and the payment dates to be arranged. At the beginning of every month, whoever has an Apple credit card receives their statement. Pretty much everybody receives it at the same time. That is actually not normal because most banks, what they do is they make sure that they're sending our their statements on a rolling basis. And a big reason for that is for their customer service departments to not get inundated with calls.Now, imagine a situation that was playing out at Goldman where everybody's getting their statement at the same time. So customer service is inundated, addressing issues becomes a whole lot harder in a timely manner and what ended up resulting for Goldman has been regulatory scrutiny. This credit card has played a role in that. Goldman is under investigation by the CFPB over credit card practices. The Federal Reserve is also probing.
Alex Ossola: Okay, that's a lot of things going on, but everything seems like it came to a head late last month. What happened?
AnnaMaria Andriotis: In November, Apple sent a proposal to Goldman Sachs to exit the partnership within the next roughly 12 to 15 months. And this proposal is for the entire partnership because in addition to the credit card, Goldman and Apple have a joint savings account that only launched earlier this year. Goldman had been wanting to get out for some time, was aware that this would be a complicated deal to offload because it's not just a credit card and because of the terms associated with their agreement.Now, really the last 12 months had been a total shift in strategy on the consumer front for Goldman Sachs. In October of last year, Goldman announced that it was doing a firm-wide reorg and also that it was going to be pulling back on its Main Street ambitions. So in November, Goldman told a team of people who work on its General Motors credit card that it was going to be looking to offload it. And then I heard not that long after that, that Apple sent this proposal.
Alex Ossola: What does this mean for people who have the Apple credit card?
AnnaMaria Andriotis: It's not like Goldman is not going to be surfacing or running these programs anymore. It is, except that the exit is underway. So generally speaking, when programs change banks, the credit card continues to function as normal until that new bank is chosen and takes on the program.
Alex Ossola: What does something like this potentially mean for Apple's prospects for payments?
AnnaMaria Andriotis: Apple needs to find a bank or another type of financial institution that will be willing to become the lender on this program, who is going to be holding the balances, the loans that as people use their credit card from month to month, or for those who actually do rack up balances, that requires finding a financial institution that is willing to accept the same terms as Goldman did or otherwise for Apple to change what it's demanding.
Alex Ossola: That was our reporter, AnnaMaria Andriotis.And that's it for Tech News Briefing. Today's show was produced by Julie Chang with supervising producer Katherine Milsop. I'm Alex Ossola for the Wall Street Journal. We'll be back this afternoon with our new TNB Tech Minute. Thanks for listening.
