Apple has launched its own buy now, pay later (BNPL) service, called Apple Pay Later, in the United States. The new service allows users to split purchases into four payments spread over six weeks, with no interest or fees. It will initially be offered to select users, with plans for a full roll-out in the coming months.
Users can get loans between $50 and $1,000 for online and in-app purchases made on iPhones and iPads with merchants that accept Apple Pay. According to the company, more than 85% of US retailers accept Apple Pay.
The launch of Apple Pay Later has the potential to disrupt the fintech sector dominated by firms like Affirm Holdings and Swedish payments company Klarna. Affirm’s shares fell more than 7%, while PayPal closed about 1% lower following Apple’s announcement.
Danni Hewson, head of financial analysis at AJ Bell, said, “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 BNPL sector experienced a surge in demand during the pandemic as pandemic-related lockdowns turned shoppers to online payment platforms. However, rising interest rates and inflation dampened purchasing power, forcing consumers to tighten their purse strings. Digital payments behemoths including PayPal and Block have expanded into the sector through acquisitions, while Affirm went public in a multi-billion dollar listing.
“We expect Apple to tread cautiously, especially in this macro environment,” said Christopher Brendler, an analyst at D.A. Davidson, alluding 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, with Goldman Sachs serving as the issuer of the Mastercard payment credential.
Apple’s entry into the BNPL market with Apple Pay Later could have a significant impact on the sector, with its large user base and widespread acceptance potentially posing a threat to existing players. However, analysts caution that Apple may need to tread carefully in the current economic environment.