Apple’s Pay Later could spell trouble for fintech firms: they should be worries
Apple’s entry into the “buy now, pay later (BNPL)” market was one of its worst-kept secrets. Pay Later will be built into the Apple Wallet and eligible for use on any purchase made through Apple Pay. Customers will be able to split the cost of purchase into four equal payments, with zero interest and fees, spread over four months.
Apple users can keep track of their Apple BNPL spending and make payments within the app. Apple Pay Later will be available wherever Apple Pay is accepted online or within the Apple Wallet app. The company has a track record of jumping into new sectors late and still managing to come out on top the iPod came out when there were tons of MP3 players on the market.
Apple Pay Later could spell trouble for fintech firms:
Apple Pay Later is courting different customers in different places. Most buy now, pay later services court e-commerce marketplaces to get their logos integrated at checkout. Apple Pay Later lets you break the cost of purchases into four equal payments that are spread over six weeks. The first payment is due when you make your purchase, and the remaining payments are due every two weeks after that. The iPhone maker announced that it is on the cusp of releasing an option for customers to split payments into four interest-free installments paid over six weeks.
Apple Pay Later emerges as a distinctly different product than what Klarna and Affirm offer, and one that isn’t much of a market predator. Using a credit card is no longer the easiest way to delay making a retail payment in full, thanks to financial technology companies such as Affirm and Klarna. This is no small threat to the Klarna and Affirm for obvious reasons.
The wide reach of iPhones among consumers and Apple’s Pay among merchants particularly in retail, where the pay-later companies are trying to use cards to boost usage is key to Pay Later’s success. This is an opportunity to greatly expand BNPL services to people who haven’t used them in the past. About three-quarters of pay-later users in the U.S. are Gen Z. Adults who make between $50,000 and $100,000 are most likely to use BNPL. And three-quarters of the UK users of BNPL are aged between 18 and 36, and 90 percent of transactions have been for fashion and footwear.
Apple doesn’t need to woo existing BNPL customers away from the services they use. Fintech excites investors, with the London-based start-up Revolut now valued at $33bn, but BNPL providers need to ensure that unwary shoppers can afford their credit. BNPL is just one product among many that Apple has in mind. The company is making a big fintech play to take more of its financial infrastructure in-house. It could well be letting them pay any way they want to.