Apple Inc has announced the launch of its new “buy now, pay later” (BNPL) service in the United States, which could potentially disrupt the fintech sector dominated by firms such as Affirm Holdings and Klarna. Apple Pay Later will allow users to split their purchases into four payments over a six-week period, with no interest or fees charged. Initially, the service will be offered to selected users, with a full roll-out planned in the near future.
The loans offered through Apple Pay Later will be between $50 and $1,000 for online and in-app purchases made on iPhones and iPads with merchants that accept Apple Pay. The company claims that over 85% of US retailers currently accept Apple Pay.
According to Danni Hewson, head of financial analysis at AJ Bell, “Apple Pay Later will absolutely wallop some of the other players. Other companies would’ve taken a look at Apple’s announcement today because they are a ubiquitous name. This will take a bite out of the market share of other players.” The announcement has already impacted the market, with Affirm’s shares falling by more than 7% and PayPal closing about 1% lower.
The demand for BNPL services has increased since the pandemic-related lockdowns, as shoppers turned to online payment platforms, especially millennials and Gen Z customers. Fintech companies, including PayPal and Block Inc, have expanded into this sector through acquisitions, and Affirm went public in a multi-billion dollar listing. However, rising interest rates and inflation have dampened the sector’s fortunes, forcing consumers to tighten their purse strings.
Analyst Christopher Brendler from D.A. Davidson believes that Apple will tread cautiously, especially in the current macro environment, referring to its decision to not use a partner and underwrite, fund, and collect on the loans directly. Apple Pay Later is enabled through the Mastercard Installments program, and Goldman Sachs is the issuer of the Mastercard payment credential.
