If you had “Apple” on your bingo card as the next Big Tech company to edge its way deeper into fintech territory, congratulations! Bloomberg News reported this week that Apple’s Apple Pay solution will gain Buy Now Pay Later (BNPL) functionality – enabling consumers using Apple Pay to pay for purchases in interest-free installments.
The new service will leverage Apple’s partnership with Goldman Sachs – Apple’s credit card partner since 2019 – to facilitate what will reportedly be called Apple Pay Later. And while it is clear that Apple is taking advantage of one of the hottest retail trends in years, it is worth noting that Apple has ventured into installment payment territory before. Apple consumers can use their Apple Card to buy designated products in the Apple store and pay via monthly, no-interest payments. Apple cardholders also have been able to buy iPhones in 24 monthly installments with zero interest since shortly after the cards were launched in August of 2019.
According to Bloomberg, when users make purchases on their Apple device using Apple Pay, the service will enable users to pay either with four, interest-free payments made every two weeks, or over several months with interest charged. Neither Goldman Sachs nor Apple have responded to the Bloomberg report.
Fueled by powerful technology trends making online and mobile commerce easier for a new generation of consumers – as well as a low-interest rate economy – Buy Now Pay Later has grown to account for more than 2% of all ecommerce transactions around the world, according to a report from Worldpay. This growth is expected to accelerate by as much as 2x by 2024. In the United States, $20 billion worth of e-commerce transactions in 2019 used BNPL payment structures.
How will Apple’s arrival as a Buy Now Pay Later competitor impact the rest of the field of Klarna, Affirm, Splitit, Afterpay, Sezzle, and so many others? Is there enough room for growth in the BNPL market for multiple players to succeed before competition between them starts to intensify? For now, it is traditional credit card companies that have the most to lose from the rise of BNPL, as Millennials who came of age during the Great Recession continue to shun interest-charging payment methods, and Generation Z consumers grow up in a world in which Buy Now Pay Later options are not just available, but increasingly commonplace.