New iPhone 11 will be big business for RI’s Citizens Bank

Business News

PROVIDENCE, R.I. (WPRI) — When Apple starts taking pre-orders for the new iPhone 11 at 8 a.m. Friday, one of Rhode Island’s biggest companies will also benefit from the rush of buyers.

Since 2015, Citizens Financial Group has been Apple’s designated lender for its iPhone Upgrade Program — making the Providence-based lender the chosen financial partner of one of the world’s most valuable companies, even though Citizens is only ranked as the nation’s 16th-largest commercial bank.

The upgrade program lets customers take out a 24-month, no-interest installment loan to pay for their new phones and gives them the option of trading it in for the newest model after the first 12 payments. They also get AppleCare warranty coverage.

“Through the smart use of analytics we are able to provide nearly instantaneous credit decisions,” Citizens Chairman and CEO Bruce Van Saun said in a speech last year. “We believe this is the best retail financing experience available in the U.S.” (He has also described Apple as “a very demanding customer.”)

For the newest iPhones, the program requires monthly payments to Citizens that range from $35.33 for an iPhone 11 with 64 GB of storage to $68.66 for an iPhone 11 Pro Max with 256 GB.

A Citizens spokesman declined to comment on the program, which the company used to refer to internally as “iUp.”

But last fall Lawrence Strauss of the investor publication Barron’s argued that the program showed Citizens is a bank to watch, “helping Citizens post steady growth in its total book of loans at a time when many rivals are struggling for any growth at all.”

The iPhone loans are unsecured, though customers must have a valid credit card to qualify. Financial filings suggest the program has been lucrative: Citizens’ portfolio of unsecured consumer loans has soared from $1 billion at the end of 2016 to $3.3 billion as of this spring. (The bank does not break out what share of those loans are for iPhones.)

Citizens and Apple first connected when the tech company was looking to finance some of the equipment it was selling in college bookstores. While that initiative was not a blockbuster, it led Apple to approach Citizens when it was looking to create a streamlined program to finance iPhone sales.

In a 2017 interview on WPRI 12’s Executive Suite, Van Saun described the program as part of a larger effort to expand Citizens’ role in unsecured lending. “It’s hard to grow a credit card business,” the CEO said, “but we have a partnership with Apple, for example.”

Van Saun also suggested the iPhone program was helping Citizens attract other potential partners. “There’s a lot of reverse inquiry – a lot of other companies are now approaching us, can we do something similar for them?” he said. “So that’s also been quite interesting for us.” (Citizens has since forged a similar partnership with the alarm company Vivint.)

Not every iPhone sale means a new loan for Citizens – the bank and Apple are competing with mobile carriers’ own upgrade programs, and some customers will pay for a phone outright rather than over time.

And Citizens is no longer Apple’s only big-time financial partner: the company’s newly launched credit card, Apple Card, was launched last month in collaboration with Goldman Sachs rather than Citizens.

Citizens shares closed Thursday at $36.37 in New York Stock Exchange trading, up 19% since the start of the year.

Ted Nesi (tnesi@wpri.com) is WPRI 12’s politics and business editor and a Target 12 investigative reporter. He is a weekly panelist on Newsmakers and hosts Executive Suite. Follow him on Twitter and Facebook

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