Put another iPhone on the tab… This week Apple launched its long-promised entry into the crowded buy now, pay later (BNPL) market. Apple Pay Later (APL) lets eligible users split an Apple Pay purchase (capped at $1K) into four payments over six weeks with no interest. Apple’s payment products fall under its services biz (think: App Store, Apple TV), which last year made up a fifth of its $394B revenue. APL has lots of competition:
Buy now, pay whoever: Klarna, Afterpay, Affirm, PayPal, and Sezzle all offer BNPL. Affirm's shares fell more than 7% after Apple’s announcement.
Popular pay: Nearly half of merchants already let users pay later online. And as of last August, over a quarter of surveyed Americans said they had used BNPL.
Trouble now, more later… The Consumer Financial Protection Bureau (CFPB), created after the ’08 financial crisis, said last year that it planned to regulate BNPL companies, which could translate to costly safeguards and added credit checks. Its goal: protect consumers from things like unclear loan terms and over-borrowing.
Inflation-stretched shoppers are increasingly relying on BNPL to pay for basics like groceries. And in 2021, 11% of BNPL users paid a late fee for missed payments.
Bad debt: This month, a CFPB report found that 69% of BNPL users don’t pay off their monthly credit-card balances.
Chase after trends and you might slip… APL was originally set to launch in September, but was delayed for technical reasons. Meanwhile, the BNPL boom has fizzled. Klarna's valuation dropped 85% last year as it posted a $1B loss. Last month Affirm laid off almost 20% of its employees after disappointing earnings. Still, with APL available for many of the merchants that already accept Apple Pay, it could have an accessibility edge over established BNPL players.