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Apple: Don't pay later, pay in four

Ryan Lawler
Illustration of a price tag split into three segments.

Illustration: Gabriella Turrisi/Axios

Apple announced Monday it will enter the Buy Now, Pay Later (BNPL) space with the upcoming launch of its Apple Pay Later service.

Why it matters: While other BNPL providers are busy striking deals with merchants to make their services available at checkout, Apple will offer its pay-in-four financing option anywhere Apple Pay is available.

Driving the news: At its Worldwide Developer Conference, Apple confirmed the long-rumored BNPL offering, which will allow Apple Pay users to choose its short-term installment plan at checkout.

  • Users will be able to make four equal payments spread out over six weeks — with the initial payment due at checkout.
  • The loans will be offered with "zero interest and no fees of any kind."
  • The product will be built into Apple Wallet, where users will be able to view, track, and repay Apple Pay Later loans.

The intrigue: Apple is entering the BNPL space at a somewhat precarious moment for the category, as rising default rates and a tightening credit market is impacting incumbents' bottom lines.

  • While Affirm's stock has rebounded somewhat from all-time lows after its second-quarter earnings report last month, its shares are still down more than 50% from their January 2021 IPO price after falling about 4.5% in afternoon trading following the Apple announcement.
  • Meanwhile, global BNPL heavyweight Klarna reduced its headcount by 10% and is reportedly raising new funds at a lower valuation ($30 billion) than its most recent round ($46 billion).

Yes, but: It doesn't appear Apple will be the one actually extending credit to users, so it could be somewhat immune to these issues.

  • As previously reported by Bloomberg, Apple is expected to be working with Goldman Sachs — which also powers Apple's credit card offering — as its financing partner for Apple Pay Later. Apple did not immediately respond to a request for more details.

The big picture: There's still plenty of room for growth in the BNPL sector, and the iPhone maker is likely to expand usage by making it an option in Apple Pay.

  • According to data from research firm SensorTower, the top five BNPL apps in the U.S. together had 7.5 million monthly active users in May, which is up 44% year-over-year.
  • But the number of Apple Pay users in the U.S. is expected to hit 47.2 million this year, according to research from Insider Intelligence.

Editor's note: This story has been corrected to note that Apple's announcement was Monday (not Tuesday).

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