Apple’s latest fintech move to buy now, pay later industry leading

Apple Pay Later will allow users to pay in four equal installments.

Jakub Porzycki | Nurphoto | Getty Images

AMSTERDAM — Apple’s move into the crowded “buy now, pay later” space has raised the stakes for fintech companies that have pioneered the trend.

The iPhone maker on Monday announced plans to launch its own “pay later” loans, expanding a range of financial services products that already includes mobile payments and credit cards. Called Apple Pay Later, the service will allow users to pay for things in four equal installments, paid monthly with no interest.

This puts BNPL players like PayPal, Affirm and Klarna in a sticky spot. The fear is that Apple, a $2 trillion company and the world’s second-largest smartphone maker, could drive customers away from these services. Affirm shares have fallen 17% so far this week on the news.

The BNPL market was already showing signs of trouble. Last month, Klarna laid off 10% of its global workforce, blaming war in Ukraine and fearing a recession.

A triple whammy of rising inflation, higher interest rates and slowing economic growth has cast doubt on the future of the industry. Rising borrowing costs have has already made the debt more expensive for some BNPL companies.

“It’s going to end up in trouble because the credit still has to unfold and be repaid,” Charles McManus, CEO of British fintech firm ClearBank, told CNBC at the Money 20/20 Europe fintech conference in Amsterdam.

“As interest rates start to rise and inflation starts to rise, all the chickens will come home to roost.”

McManus said the industry is pushing people into debt they can’t afford to pay back and therefore should be regulated. The UK is seeking to pass BNPL regulations, while US regulators have launched an investigation into the sector.

“Do I pay my gas bill or do I pay off the chair I bought three years ago with an interest-free loan that is coming due?” McManus said, warning that “the excesses always come back”.

Apple said it would handle loans and credit checks for Apple Pay Later through an internal subsidiary, excluding Goldman Sachs – which has previously worked with the company on its credit card – from the equation. . This move is an important step 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 big win for consumers around the world.”

“Plagiarism 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 fintechs operating in the market. Mollie offers installment loans through a partnership with fellow fintech company in3.

“The BNPL space is getting crowded with many new players still entering the market,” he said.

“It will be difficult for players with a below-average proposition to compete effectively against the top players out there.”

However, James Allum, senior vice president for Europe at payments company Payoneer, said there was enough room in the market for various companies to compete against each other.

“Companies should seek collaboration opportunities rather than competition and threats,” he said.

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