Apple to enter USA finance space with Buy Now Pay Later scheme

Tech giant Apple has announced that it will be entering the finance space by offering Buy Now Pay Later services to users of its Apple Pay app.

As an extension of the Apple Wallet, the new service is positioned to have a huge advantage over rivals in the space thanks to the built-in userbase, meaning users will not need to involve a third-party service, not to mention the high degree of trust and affinity Apple users typically have for the company.

The scheme, named Apple Pay Later, will only be available to US users, and is scheduled to be launched with the iOS16 update expected in September 2022, according to the announcement made at its Worldwide Developers Conference last week

The BNPL service will allow Apple users to split up the cost of a purchase made with Apple Pay into four equal instalments over six weeks, without any fees or interest. However, the service will not be available for physical point-of-sale transactions, only for online and in-app purchases.

Significantly, Apple will be underwriting and financing the loans itself, through Apple Financing LLC, a wholly owned subsidiary which has already obtained lending licences in most US states, rather than relying on a bank. This means that it will have to absorb losses when borrowers fail to repay.

The move can be seen as a gamble, with large tech companies so far staying away from getting directly involved in financing. The Wall Street Journal says that Apple is now convinced it has the data and technology it needs to approve customers without risking big losses, citing people familiar with the matter.

“Much like a bank, the tech giant will rely on credit reports and FICO scores to check applicants’ financial standing. But it also plans to use its giant store of Apple ID data for identity verification and fraud prevention,” the report read.

During the pandemic, BNPL services saw their popularity surge, more than doubling in users in 2021 – although that growth is expected to stall.