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Apple Launches ‘Buy Now, Pay Later’ Service in US

Apple Inc has announced the launch of its “buy now, pay later” (BNPL) service, Apple Pay Later, in the United States. The move is expected to disrupt the fintech sector that is currently dominated by firms like Affirm Holdings and Klarna. The BNPL service will allow users to split purchases into four payments, spread over six weeks, with no interest or fees. The loans will be available for online and in-app purchases made on iPhones and iPads with merchants that accept Apple Pay, with amounts ranging from $50 to $1,000. The service will initially be offered to select users, with a full rollout planned in the coming months.

The service, Apple Pay Later, will allow users to split purchases into four payments spread over six weeks with no interest or fees, the company said. It will initially be offered to select users, with plans of a full roll-out in the coming months.

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Apple Pay Later’s entry into the BNPL market is expected to significantly impact other players in the industry. Danni Hewson, head of financial analysis at AJ Bell, predicts that Apple Pay Later “will absolutely wallop some of the other players”. Affirm, a major player in the BNPL space, saw its shares fall more than 7% following the announcement. PayPal also closed about 1% lower.

The BNPL sector experienced a surge in demand during the pandemic-related lockdowns, as shoppers turned to online payment platforms. Fintech companies offering BNPL services, especially to millennials and Gen Z customers, benefited from the increased demand. However, rising interest rates and inflation have since dampened purchasing power and forced consumers to tighten their purse strings.

Apple’s entry into the BNPL market is expected to shake things up, but the company is treading cautiously. Christopher Brendler, an analyst at D.A. Davidson, notes that “we expect Apple to tread cautiously, especially in this macro environment”. Apple has decided to not use a partner and will underwrite, fund, and collect on the loans directly. The service is enabled through the Mastercard Installments program, with Goldman Sachs as the issuer of the Mastercard payment credential.

With over 85% of US retailers accepting Apple Pay, the launch of Apple Pay Later is expected to further solidify the company’s position in the payments industry.