Apple rolls out initial BNPL service


Dive Brief:

  • Tech behemoth Apple this week launched an initial version of its new buy now, pay later service, called Apple Pay Later, after announcing last year that its take on the popular financing tool was in the works. A “prerelease” of the service was made available to “select” users in the U.S. on Tuesday, the company said on its website.
  • To initiate use of the Apple BNPL service, which lets users make purchases and pay for them in four installments over six weeks, users must apply for a loan from Apple’s financing arm within its digital wallet.
  • The Apple service can only be tied to a debit card, not a credit card, and is being enabled through card giant Mastercard’s installment program, with investment bank Goldman Sachs acting as the issuer.

Dive Insight:

The Apple offering, which won’t charge fees or interest, is similar to BNPL tools already in the market. For approved users, it will be available through Apple’s iPhones and iPads. Apple notes in its web post that a user’s bank may charge fees if a debit card account lacks sufficient funds for loan repayments.  

“Starting today, Apple will begin inviting select users to access a prerelease version of Apple Pay Later, with plans to offer it to all eligible users in the coming months,” the company said in the Tuesday press release. A spokesperson for the company didn’t immediately respond to a query regarding the number of users in the initial group.

Users of the new service can access loans of between $50 and $1,000, Apple said. They’ll be able to track and manage their loans and payments in Apple’s applications.

“After a user is approved, they will see the Pay Later option when they select Apple Pay at checkout online and in apps on iPhone and iPad, and can use Apple Pay Later to make a purchase,” the company said. “Once Apple Pay Later is set up, users can also apply for a loan directly in the checkout flow when making a purchase.”

The buy now, pay later phenomenon began about a decade ago in Europe and Australia with the Swedish company Klarna and the Australia business Afterpay playing lead roles in its growth over the years. The deadly COVID-19 pandemic super-charged the trend when consumers took to it for online shopping.

Apple has teased its coming BNPL offering since last year, hinting that it would jump into the ring with its own BNPL service, so expectations have been high for what the consumer brand darling would offer its fans. At this point, Apple’s offering appears to largely mimic what is already available from other providers.

With competition in the arena having spooled up in recent years, Apple’s arrival is set to further intensify a battleground that also includes San Francisco-based Affirm, Sydney-based Zip and Minneapolis-based Sezzle. Rival Afterpay is now owned by San Francisco-based Square parent Block, which purchased it for $29 billion in 2021.

Despite the growing consumer popularity of the financing tool worldwide, the companies have been hard-pressed to make money. With e-commerce demand fueled by the pandemic now waning, the companies are rushing to make their BNPL services available in stores on point-of-sale devices.

Regulators worldwide are ratcheting up their scrutiny of the financing tool, suggesting they fear the potential for consumers to take on too much debt. That’s a concern likely to increase as economies and consumers grapple with the increasing threat of a potential recession.

“Apple not allowing customers to link to a credit card is a unique feature in its BNPL product that should limit the ability of borrowers to pay off one form of debt with another form of debt, though it does not fully address our broader concerns over the structural and cyclical challenges the buy-now-pay-later business model continues to face,” Fitch Ratings Senior Director Michael Taiano said in an emailed statement.

In the U.S., the Consumer Financial Protection Bureau said last year that it was considering rules or guidance for the industry. The U.S. agency has also pushed credit reporting bureaus to develop processes for taking BNPL into account on consumer credit profiles, but they have largely failed to make progress so far.

Apple said it will begin reporting the Apple Pay Later loans to credit bureaus in the fall, including past, future and current loans, “so they are reflected in users’ overall financial profiles and can help promote responsible lending for both the lender and the borrower.”


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