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 to have a hand in how you manage that money.
The credit card, backed by multinational banking behemoth Goldman Sachs, was physically imposing and fodder for parody, an all-white, heavy metal swiping apparatus. Its compatible software was the thing that would help people lead a “healthier financial life,” Jennifer Bailey, the company’s vice president of Apple Pay, said at the time. See all your transactions in Apple’s digital wallet, get 24/7 text messaging support via Messages, view color-coded charts of your purchases. This was the stuff of the financial 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 tap into its existing Apple Pay service for in-app and online purchases, and let iPhone users in the US pay for things in installments—with no fees and zero interest—over six weeks. Pay upfront? In this economy? Why bother, with all of the “BNPL” options available.
Apple is joining the likes of Affirm, Klarna, Afterpay, and other companies that offer people the option to pay for purchases over time. These services have seen notable growth in the past few years and are projected to account for $680 billion, or 12 percent, of all ecommerce transactions by 2025. They set themselves apart from credit card companies by offering short loans with no interest or fees, unlike credit cards. They don’t run hard credit checks before issuing a loan. And in many cases, BNPL companies aren’t the lenders themselves—they offer technology services but rely on bank partners for the loans.
Buy-now, pay-later services are also troubling to consumer advocates and researchers who study capital markets. Late last year, the Consumer Financial Protection Bureau opened an inquiry into BNPL services, expressing concern about “accumulating debt, regulatory arbitrage, and data harvesting in a consumer credit market already quickly changing with technology.”
Marshall Lux, a research fellow at the Mossavar-Rahmani Center for Business and Government at the Harvard Kennedy School, has written that BNPL services exist in a “legal gray area” and that, for consumers who already struggle to pay for things, “BNPL can facilitate spending beyond capacity to pay.” Financial experts warned in an SFGate story that this trend is especially dangerous for young consumers.
Consumer sentiment on these zero-percent payment plans is still largely positive, though, as Lux notes in his paper. If there’s anything Apple is skilled at, it’s tapping into positive consumer sentiment. For the past few years, Apple has sat back and watched other merchants reap the benefits of BNPL schemes, while slowly dipping its toes into zero-interest plans. (Prior to this, Apple customers could finance a new iPhone at a zero percent APR, provided they purchased it with an Apple credit card.) Now, Apple is officially entering a fraught category with potentially negative consequences—but not without some provisions that set its offerings apart from other BNPL services.