Apple debuted its long-anticipated buy now, pay later programme in the US on Tuesday, as the $2.5tn tech giant expands further into finance in a challenge to incumbents including Klarna and Affirm.
The iPhone maker unveiled plans for Apple Pay Later at its developers conference in June. After several months of delays, “select” US consumers will be invited to use the finance tool on Tuesday, the company announced.
Apple Pay Later is built into the Wallet function of the iPhone and lets users pay for online goods and in-app services in four payments spread over six weeks. The zero-interest loans of between $50 and $1,000 will be made through a wholly owned subsidiary, Apple Financing.
Goldman Sachs, which Apple partnered with to launch its credit card in 2019, will play a role in facilitating Apple Pay Later, by allowing Apple access to Mastercard’s network since the iPhone maker lacks a licence to issue payment credentials directly.
The scheme features “no fees and no interest” and was designed to let customers “make informed and responsible borrowing decisions”, said Apple Pay head Jennifer Bailey. The service will be embedded into the iPhone operating system, which accounts for more than 50 per cent of smartphones in the US, according to data from Counterpoint Research.
Apple Pay Later follows in the footsteps of Klarna, Afterpay and Affirm, pioneers of the buy now, pay later model, which have struggled to retain their once-hot momentum as the economy has slowed and interest rates have surged.
When Apple announced its buy now, pay later plans, Klarna chief executive Sebastian Siemiatkowski called the move “a great win for consumers worldwide”, adding in a post on Twitter: “Plagiarism is also the highest form of flattery.”
Apple’s continued push into finance has drawn attention from Wall Street and regulators.
JPMorgan chief executive Jamie Dimon said just before Apple’s announcement last year that he saw Apple as an important long-term challenger. “That’s a bank . . . If you move money, hold money, manage money, lend money, that’s a bank. There’s a lot of competition coming.”
Rohit Chopra, director of the Consumer Financial Protection Bureau, told the Financial Times in July that his agency would “have to take a very careful look [at] the implications of Big Tech entering this space”. Apple is so far the only large tech company to launch a buy now, pay later product in the US.
Affirm said it welcomed the competition and was “well-positioned to win” as Apple entered the fray.
Consumers cannot yet sign up directly for Apple Pay Later, but the tech giant said it would “begin inviting select users to access a pre-release version of Apple Pay Later, with plans to offer it to all eligible users in the coming months”.
In the past five years, Apple has introduced a host of services tied to the iPhone and iPad in an effort to reduce its reliance on hardware sales and incentivise users to stay within its ecosystem of products and services.
The services division that houses Apple’s financing programme includes iCloud storage, warranties and App Store purchases. It accounted for about a fifth of Apple’s revenue last year, $78bn, with margins of more than 70 per cent.