On Tuesday, Apple Inc. launched its “buy now, pay later” (BNPL) program in the United States, a move that poses a threat to fintech companies like Affirm Holdings and Klarna, which currently dominate the industry. Apple Pay Later will allow customers to split purchases into four installments over six weeks with no interest or penalties. The service will be available to a small group of users initially, with a broader rollout planned in the coming months.
According to the company, customers who use iPhones and iPads to make online and in-app purchases from businesses that use Apple Pay can acquire loans ranging from $50 to $1,000. Apple Pay is accepted at more than 85% of US merchants, according to the business.
Danni Hewson, AJ Bell’s head of financial analysis, said, “Apple Pay Later will handily defeat a few of the rivals. Because of their popularity, other businesses would have looked at what Apple announced today. This will reduce the other firms’ market share.”
The launch of Apple Pay Later has already had an impact on the stock prices of some BNPL companies, with Affirm experiencing a more than 7% decline in share price, and PayPal finishing down approximately 1%.
The COVID-19 pandemic and related lockdowns in 2020 have driven users to online payment platforms, boosting demand for fintech companies that provide BNPL services, particularly among millennials and Gen Z clients. Digital payment giants like PayPal and Block Inc have entered the market through acquisitions, while Affirm went public with a multibillion-dollar IPO. However, the sector’s fortunes have changed due to inflation and rising interest rates that have decreased consumer purchasing power.
Christopher Brendler, an analyst at D.A. Davidson, expects Apple to proceed cautiously, especially in the current macro climate, as the company has chosen to underwrite, fund, and collect on loans without using a partner. The business also added that Goldman Sachs had issued the Mastercard payment credential and that it was through the Mastercard Installments program that Apple Pay Later was made available.
In conclusion, the launch of Apple Pay Later in the United States poses a threat to existing BNPL companies. With its popularity and acceptance rate, Apple Pay Later is likely to affect the market share of its rivals. However, the company is expected to proceed with caution, given the current macro climate, and analysts will be watching the impact of this move on the fintech industry.
