First came Apple Pay. Then the Apple Card, in partnership with Goldman Sachs. Now Apple has entered the burgeoning Buy-Now-Pay-Later (BNPL) market with Apple Pay Later.
Can Apple handle Apple Pay Later?
So is Apple looking to become a bank – and is this a wise move?
On June 6, Apple CEO Tim Cook announced the launch of Apple Pay Later. The new venture will be a wholly owned subsidiary of Apple, and will include the capacity to check user credit and extend short-term loans to users.
The new loan service, which follows the launch of similar offerings from Affirm and PayPal, was announced during Apple’s developer conference.
Later this year, when the company’s new iOS 16 iPhone software is released, users will be able to buy products with Apple Pay and pay the balance off in four equal payments over six weeks as a buy now, pay later (BNPL) service.
Apple has partnered with Mastercard, which interacts with merchants on Apple’s behalf and will be providing the tech company with its white-label BNPL product known as Mastercard Instalments.
Apple Card issuer Goldman Sachs also is involved as the technical issuer of the loans and is the official BIN sponsor, but Apple is not using Goldman’s credit decisions or its balance sheet to issue the loans.
In an exclusive statement for Payments Cards & Mobile, Steven Lewis, Senior Vice President, MarketBridge, said: “Another risk of this launch is to Apple’s relationships with issuers and merchants.
Apple worked diligently in the early days of Apple Pay to encourage issuers to sign-on to their product, many of which have still not seen promised returns.
On top of being an expensive payment option for issuers, Pay Later will circumvent credit card and retailer financing options by moving those transactions directly to Apple – and the sting of the unfulfilled Apple Pay dream continues.”
PCM SAYS: One bite too many?
For some time, tech companies have had their eyes on what they see as generous margins and rich revenue sources from financial services.
They believe that, in many ways, they can deliver better and more innovative services than banks in the digital era – and at lower cost.
However, Apple’s latest foray into banking may prove a step too far.
The truth is that risks abound with this move, for Apple’s brand perception, their relationships with issuers and merchants, and – as we cover elsewhere in these pages – much tighter regulatory scrutiny of BNPL in the months and years ahead.
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