Apple Pay Later allows users to split payments into four interest-free instalments.
Apple Inc has introduced its own “buy now, pay later” (BNPL) service in the United States, named Apple Pay Later, which could potentially disrupt the BNPL sector that is currently dominated by companies like Affirm Holdings and Klarna, among others.
Apple announced on Tuesday that its newly launched service, Apple Pay Later, permits users to divide their purchases into four payments that are spread over six weeks without incurring any interest or fees. As per Apple, users will be able to obtain loans ranging from $50 to $1,000 for online and in-app purchases made through iPhones and iPads with vendors who accept Apple Pay. Initially, the service will only be available to a limited number of users, with a full rollout planned in the upcoming months.
Apple Pay Later to Disrupt BNPL Sector
Apple Pay Later will pose a threat to the BNPL sector, as more than 85% of U.S. retailers accept Apple Pay, making the company a significant player in the sector. The new service is expected to compete with established players such as Affirm, which saw its shares fall more than 7% following the announcement, and PayPal, which closed about 1% lower.
Christopher Brendler, an analyst at D.A. Davidson, stated that Apple should proceed with caution, particularly in the current macroeconomic environment, as the company has opted not to employ a partner to underwrite, fund, and collect on the loans directly. However, despite this cautious approach, Danni Hewson, Head of Financial Analysis at AJ Bell, is of the opinion that Apple Pay Later will “absolutely wallop” other companies in the market.
BNPL Sector Grows in Popularity
The BNPL industry has become increasingly popular in recent years, particularly among millennials and Gen Z customers. The pandemic-induced lockdowns resulted in a surge in online payment platforms, creating a higher demand for BNPL services from fintech firms. Major digital payment companies such as PayPal and Block Inc have entered the market through acquisitions, while Affirm went public in a multi-billion dollar listing.
Nevertheless, the fortunes of the sector have taken a turn recently, with the increasing interest rates and inflation rates affecting the purchasing power, causing consumers to cut back on spending.
Mastercard Installments and Goldman Sachs Partnership
The Mastercard Installments program powers the Apple Pay Later service, and according to the company, Goldman Sachs is the issuer of the Mastercard payment credential. This collaboration enables Apple to provide its users with a secure and smooth payment process while also leveraging Mastercard’s extensive network of merchants and customers worldwide.
In conclusion, Apple Pay Later is expected to disrupt the BNPL sector dominated by companies like Affirm and Klarna. With its widespread acceptance and the ability to offer interest-free instalments, Apple’s new service could become a popular payment option among consumers.
