Apple’s all-in approach to buy now, pay later (BNPL) is viewed as an indicator of the company’s increased emphasis on financial services. Apple Pay has been around since 2014, and three years ago the tech giant issued a credit card with the help of Goldman Sachs. Now, Apple Pay users will be able to avail themselves of the new Apple Pay Later. A subsidiary of the Cupertino-based iPhone firm has received the necessary licenses to launch the new financial offering in most U.S. states. Apple’s initial plans are to underwrite and fund loans capped at $1,000.
“Big technology companies have long eyed finance as a way to deepen their relationships with customers,” writes The Wall Street Journal. “But most have tapped banking and financial-technology partners to handle the nitty-gritty of vetting customers and dealing with the raft of regulations that surround financial products. Apple is doing things differently.”
The plan to become a lender through Apple Financial Services exposes the usual risks associated with customers who default. Based on Federal Reserve data, Experian reports consumer loan delinquency rates of greater than 180 days was at 34 percent as of Q3 2021. With eight years of consumer data from Apple Pay, the company is confident it has the customer data and analytics technology to make safe bets.
Apple “feels comfortable becoming a lender in part because of the small dollar amount and short duration of the payment plans, people familiar with the matter said,” reports WSJ, noting “payment plans per transaction will max out at $1,000, and the amount for which consumers are approved will depend on their credit reports and scores. Apple also will factor in its own information on millions of customers for identity verification and fraud prevention.”
“The global BNPL market hit an estimated $5 billion last year, according to market research firm Grand View Research,” writes Yahoo Finance, adding that “with Apple’s entrance later this year with Apple Pay Later, the industry is on the cusp of a major shake-up.” A Credit Karma report says almost 60 percent of consumers are more likely to use BNPL as a result of runaway inflation.
The Experian report indicates those between the ages of 18 and 40 — Millennials and Gen Zers — are the groups whose consumer debt load has grown the fastest in 2021, up 15 percent for Millennials and up by nearly 30 percent for Gen Z. In its BNPL explainer, Yahoo Finance says such offerings have replaced the old “layaway” programs of yore, noting that “in most cases, these installment plans are interest-free. You’ll pay extra only if you can’t make the payments on time.”
Pymnts.com writes that Apple is the 80th entry in the “very hot” BNPL space, speculating it is hoping the tactic will buoy what it characterizes as a disappointing performance by Apple Pay. Apple Pay Later is utilizing the Mastercard network to connect to merchants, with Goldman as its sponsor.
Buy Now, Pay Later Will Get More Than One Bite at the Apple, The Wall Street Journal, 6/13/22
Why the Affirm CEO Isn’t Worried About Apple’s ‘Pay Later’ Service, Yahoo Finance, 6/10/22
The Next Frontier for Buy Now, Pay Later Is Plastic, CNBC, 6/10/22