Apple Pay Later: A New Service To Increase Total Transanctions

Apple has launched a new service called “Apple Pay Later” that aims to increase transactions made through its Wallet app. This service allows users to lend money directly from the app, and it was first announced in 2021 but only officially revealed at the Worldwide Developers Conference in June 2022. Despite facing several delays in the past due to iOS 16 rollout last year, the service is now being made available to select users in a prerelease version, with plans to roll out to everyone in the coming months.

Apple’s Expansion Into Financial Products And Services

Apple Pay Later represents a significant expansion of Apple’s services beyond hardware sales. It allows users to apply for loans ranging from $50 to $1000 through their mobile devices, with no interest charged. The loan payoffs can be split into four payments, and users have six weeks to pay off the loans. To qualify for a loan, users must use merchants that accept Apple Pay.

Partnerships And Risk For Repayment

Apple has formed partnerships with MasterCard and Goldman Sachs to create a subsidiary committed to financing these loans. The new entity will start reporting loan data to US credit bureaus starting this fall. This partnership allowed for the creation of “Apple Financing LLC”, which enables Apple to sidestep problems applying for conventional cash funding for its loans.

Analysts are aware that Apple Pay Later’s strategy poses some risks regarding repayment issues, as the BNPL (Buy Now Pay Later) industry usually targets consumers who tend to overdraw their bank accounts or carry credit balances. However, Apple’s unique closed-loop system for approving and financing purchases will provide important insights into individual consumers’ risk profiles.

Less About Loan Portfolio, More About In-App And Online Sales Volume

Unlike typical BNPL fintechs such as Affirm, Klarna, and Afterpay, Apple Pay Later seems to focus less on building a large loan portfolio and more on increasing in-app and online sales volume for its wallet. Users can apply for loans directly from within the Apple Wallet app without requiring any credit checks, similar to other BNPL lenders. The Pay Later option will appear in the checkout flow online, iPhone and iPad apps, and will be passively embedded into the checkout of every merchant that accepts Apple Pay.

Unique Features Of Apple Pay Later

Users can manage, track, and repay loans within their Apple Wallet. Loans are between $50 and $1,000 with no interest charges or fees. Merchants that already accept Apple Pay can use Apple Pay Later without making any changes to their existing setup.

Users can view the amount due for existing loans and the total amount due in the next 30 days in their Apple Wallet. The debit card is the repayment method, while credit cards are not accepted for loan repayments.

Impact On The Industry

Apple’s decision to report loans to credit bureaus this fall sets a new standard for the industry. Furthermore, Affirm’s stock price fell 7% following the announcement of Apple Pay Later. However, Affirm acknowledges that transparent and flexible payment options will benefit consumers if there are no late or hidden fees.

Conclusion

The launch of “Apple Pay Later” represents a significant move by Apple into financial services by diversifying beyond hardware sales. This new service aims to increase transactions made through its Wallet app by offering users convenient access to interest-free loans with reasonable repayment terms. With partnerships with MasterCard and Goldman Sachs, Apple aims to sidestep problems typically encountered when applying for conventional cash funding for its loans.

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