Apple Pay Later will allow users to pay for everything in four equal installments.
Jakub Porzycki | Nurphoto | beautiful pictures
AMSTERDAM – Apple Moving into the crowded “buy now, pay later” space has raised the stakes for fintech companies pioneering this trend.
iPhone maker announced the plan launched its own “postpaid” loans on Monday, expanding a range of financial services products that already include mobile payments and credit cards. Called Apple Pay Later, the service will let users pay for everything in four equal, monthly installments with no interest.
That makes BNPL players like PayPal, Confirm and Klarna in an awkward spot. The fear is that Apple, which is valued at $2 trillion and is the world’s second-largest smartphone maker, could lure customers away from such services. Affirm shares are down 17% so far this week.
The BNPL market has shown signs of difficulty. Last month, Klarna lay off 10% of the global workforce, blaming the war in Ukraine and recession fears.
A whale three out of rising inflation, higher interest rates and economic growth slows down has put the future of the industry in doubt. The cost of borrowing for climbing has made debt more expensive for some BNPL companies.
“It’s going to be trouble because credit always has to be released and repaid,” Charles McManus, CEO of British fintech firm ClearBank, told CNBC at the Money 20/20 Europe conference in Amsterdam.
“When interest rates start to rise and inflation starts to rise, all the chickens will go home to sleep.”
McManus said the sector is pushing people into debt they can’t pay back and therefore need to be managed. The UK is looking to push through BNPL regulation, while US regulators have opened an investigation into the area.
“Do I pay the gas bill or pay off the armchair I bought three years ago with interest-free credit coming due?” McManus said, warning that “redundancy always comes back.”
Apple says it will process lending and credit checks for Apple Pay Later through an internal subsidiary, taking Goldman Sachs – which had previously worked with the credit card company – out of the equation. The move is an important one that will give Apple a much larger role in financial services than it currently plays.
Sebastian Siemiatkowski, CEO of Klarna, said the launch of Apple Pay Later marked a “huge win for consumers around the world.”
“Plague is also the highest form of flattery,” he tweeted earlier this week.
Ken Serdons, chief commercial officer of Dutch payments startup Mollie, said Apple’s BNPL feature “raises the bar” for active fintechs in the market. Mollie offers installment loans through a partnership with fellow fintech firm in3.
“The BNPL space is getting crowded with a lot of new players still entering the market,” he said.
“It will be very difficult for players with sub-clauses to effectively compete with the best players available.”
However, James Allum, senior vice president of Europe for payments company Payoneer, said there is enough room in the market for many different companies to compete.
“Businesses should consider opportunities for cooperation rather than competition and threats,” he said.
