Apple: Don't pay later, pay in four
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).