Apple Pay Later could disrupt the credit card industry more than Apple Card ever could.
Yesterday, a report from Bloomberg Law stated that Apple is working on a new financing service called Apple Pay Later. The new service would enable customers making a purchase with Apple Pay to delay payments over time, similar to other financing offerings like Affirm or Paypal.
Apple Inc. is working on a new service that will let consumers pay for any Apple Pay purchase in installments over time, rivaling the "buy now, pay later" offerings popularized by services from Affirm Holdings Inc. and PayPal Holdings Inc.
The upcoming service, known internally as Apple Pay Later, will use Goldman Sachs Group Inc. as the lender for the loans needed for the installment offerings, according to people with knowledge of the matter. Goldman Sachs has been Apple's partner for the Apple Card credit card since 2019, but the new offering isn't tied to the Apple Card...
The report sent shares of existing 'Buy Now, Pay Later' companies tumbling in the stock market on Wednesday. Stockholders are certainly worried that Apple entering the market may have a material impact on the performance of similar companies that specialize in the area.
Smaller rivals Zip Co Ltd and Sezzle fell sharply. Nasdaq-listed Affirm Holdings Inc tumbled more than 14% on Tuesday following the Bloomberg report and closed 10.5% lower.
While other 'Buy Now, Pay Later' companies certainly have to worry about Apple entering the sector, I think that such a service, if Apple built it a certain way, could actually be more or a disrupter in the credit card industry because of the scale that Apple Pay has now.
For anyone who has made a major purchase online, you normally have one of two options: pay with your own debit or credit card or use financing that happens directly through the merchant. Major retailers typically have their own financing options through some kind of program or branded credit card. However, if you aren't approved for these cards, you are left using your regular credit card with its astronomical interest rates.
While some companies like Affirm and Paypal have gotten partnerships with smaller merchants to offer financing options, none of them will have the scale that Apple Pay has. With that scale, Apple has the opportunity to offer a much more financially beneficial option to customers who would typically use their credit cards. This could have enormous implications for the credit card industry who make insane amounts of money by charging exorbitant interest rates for those who carry a balance on their card.
Of course, we don't know the exact details of 'Apple Pay Later' just yet. Apple and Goldman Sachs, who it is supposedly partnering with on the service, could come back with just as unreasonable interest rates and terms for its installment program. We also don't know exactly how much a purchase needs to be to kick in 'Apple Pay Later' as an option.
However, with Apple Card plainly positioned as a new approach to the credit card, I think the company is planning to introduce something that would make the service an obvious choice over grabbing a credit card that has a 28% interest rate on a major purchase.
With a service like 'Apple Pay Later,' Apple could make its biggest dent in disrupting the credit card industry which has been due for a reckoning for decades now.