Apple’s introduction of a credit card in 2019 was the first step: Apple not only wanted to be the recipient of your money, it wanted a finger in the pie in how you manage that money.
The credit card, backed by the multinational banking behemoth Goldman Sachs, was physically impressive and fodder for parody, an all-white, heavy metal ironing machine. Its compatible software was what would help people lead a “healthier financial life,” Jennifer Bailey, the company’s vice president of Apple Pay, said at the time. View all your transactions in Apple’s digital wallet, get 24/7 SMS support via Messages, view color-coded charts of your purchases. This was the matter of the economic future.
So it’s no surprise that Apple would jump on the latest payment trend: buy now, pay later. At its annual software conference this week, Apple said that “later this year,” with the release of its new iPhone software, it would roll out Apple Pay Later. This will leverage its existing Apple Pay service for in-app and online purchases, allowing iPhone users in the U.S. to pay for things in installments – with no fees and zero interest – over six weeks. Pay in advance? In this economy? Why bother, with all the available “BNPL” options.
Apple joins companies like Affirm, Klarna, Afterpay and other companies that offer people the ability to pay for purchases over time. These services have experienced a remarkable growth in the last few years and are is expected to account for $ 680 billion, or 12 percent, of all e-commerce transactions by 2025. They differ from credit card companies by offering short-term loans with no interest or fees, as opposed to credit cards. They do not perform hard credit checks before issuing a loan. And in many cases, BNPL companies are not lenders themselves – they offer technology services, but are dependent on bank partners for the loans.
Buy now, pay later services are also of concern to consumer advocates and researchers studying capital markets. Late last year, the Consumer Financial Protection Bureau opened a query into BNPL services and expressed concern about “debt accumulation, regulatory arbitrage and data collection in a consumer credit market that is already rapidly changing with technology.”
Marshall Lux, a researcher at the Mossavar-Rahmani Center for Business and Government at Harvard Kennedy School, has written that BNPL services exists in a “legal gray area” and that for consumers who are already struggling to pay for things, “BNPL can ease spending beyond the ability to pay.” Financial experts warned in an SFGate story that this trend is particularly dangerous for young consumers.
However, consumer sentiment on these zero-percent payment plans is still largely positive, as Lux notes in its paper. If there’s one thing Apple is good at, it is taking advantage of positive consumer sentiments. In the last few years, Apple has leaned back and seen other merchants reap the benefits of BNPL schemes as they slowly dip their toes into zero-interest plans. (Prior to that, Apple customers could finance a new iPhone at a zero percent APR, provided they bought it with an Apple credit card.) Now, Apple is officially entering a full category with potentially negative consequences – but not without some provisions , indicating its offerings other than other BNPL services.