Apple launches “Buy Now, Pay Later” service, threatening Fintech sector dominance


    29th March 2023 – (New York) Apple Inc. has entered the buy now, pay later (BNPL) market, with the launch of its new service, Apple Pay Later. The move is expected to disrupt the fintech sector, which is dominated by companies such as Affirm Holdings and Klarna.

    The service allows users to split purchases into four payments over six weeks, with no interest or fees. It is initially being offered to select users, with a full roll-out planned for the coming months. Users can get loans between $50 and $1,000 for online and in-app purchases made on iPhones and iPads with merchants that accept Apple Pay.

    More than 85% of U.S. retailers accept Apple Pay, which gives the tech giant a significant advantage in the BNPL market. According to Danni Hewson, head of financial analysis at AJ Bell, “Apple Pay Later will absolutely wallop some of the other players. Other companies would’ve taken a look at Apple’s announcement today because they are an ubiquitous name. This will take a bite out of the market share of other players.”

    The launch of Apple Pay Later has already had an impact on the stock prices of other BNPL companies. Shares in Affirm Holdings fell more than 7%, while PayPal closed about 1% lower.

    The BNPL sector experienced significant growth in 2020, as pandemic-related lockdowns increased demand for online payment platforms. This led to a rise in the popularity of fintech companies offering BNPL services, particularly among millennials and Gen Z customers.

    However, rising interest rates and inflation have dampened consumer purchasing power, causing the fortunes of the sector to turn. Digital payments giants such as PayPal and Square have expanded into the BNPL sector through acquisitions, while Affirm went public in a multi-billion dollar listing.

    Despite the potential for disruption, Apple is expected to tread cautiously in this macro environment. Christopher Brendler, an analyst at D.A. Davidson, noted that “We expect Apple to tread cautiously, especially in this macro environment,” alluding to its decision to not use a partner and underwrite, fund, and collect the loans directly.

    Apple Pay Later is enabled through the Mastercard Installments program, with Goldman Sachs as the issuer of the Mastercard payment credential. As the BNPL market continues to evolve, it remains to be seen how Apple’s entry will affect the dominance of existing players in the fintech sector.