Cheat Sheet: Apple’s interest in the buy now, pay later space takes shape with Apple Pay Later

Apple is reportedly developing a buy now, pay later feature for Apple Pay.

Details

• On July 13, Bloomberg reported that Apple was working on a buy now, pay later solution tentatively called Apple Pay Later that will be incorporated into Apple Pay.
• The solution will allow Apple Pay users to break their purchase payments into four interest-free installments made every two weeks or across several months with interest. 
• Goldman Sachs will reportedly act as the lender for the loans, building on a relationship that’s existed since 2019 when Goldman Sachs began powering the Apple Card credit card. 

Bloomberg also reports that interested Apply Pay Later users will need to apply for approval to use the service through the iPhone’s Wallet app. Moreover, Apple intends to offer customers exit payment plans that help them pay off their remaining balances should they choose to opt out of Apple Pay Later. While the service is still in the works, Apple Pay Later plans will reportedly exclude late fees and processing fees, while charging interest for longer plans but there’s no information on what that interest rate might be. For comparison, Affirm charges a maximum of 30% APR. 

Apple Pay Later will not run credit checks on users either. 

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Since Apple Pay’s launch in 2014, Apple has slowly been building its payment solutions by experimenting with innovative ideas. Last year, the technology company acquired Mobeewave, which enables phones to receive payments by tapping another phone or credit card on its back. 

If fully realized, Apple Pay Later would be a strong addition to Apple’s payment services. Apple Pay is accepted at 85 percent of all U.S. retailers and in February 2020, Quartz reported that Apple Pay accounts for about 5 percent of global card transactions. Some reporters think a BNPL feature could potentially expand Apple Pay use in lieu of standard credit cards. Apple benefits from a percentage of Apple Pay transactions and users may find a BNPL feature sufficient incentive to lean more about Apple Pay.

Impact

Apple’s foray into BNPL shows that the BNPL sector has a bigger destiny than being the focal point of a standalone company or an app. More tech firms, like Apple and Shopify, are incorporating BNPL as a feature into an existing payment channel. 

The extension of Apple’s partnership with Goldman Sachs also shows the extent of the latter’s interest in consumer lending. Goldman Sachs has its own MarcusPay, which offers point-of-sale financing, allowing users to break up big-ticket purchases into monthly payments. Loans ranging from $750 to $10,000 are repaid over 12 or 18 months at a fixed rate of 10.99% to 25.99%, with no fees apart from interest, according to CNBC. The product launched in partnership with JetBlue Airways, allowing customers to break vacation package payments into monthly installments.