Apple Pay Later is more about making Apple Pay more convenient than trying to dominate the ‘buy now, pay later’ arena, analysts say

  • Apple has announced a “buy now, pay later” service offering short loans of between $50 and $1,000.
  • Apple Pay Later could help increase demand for iPhones, one analyst said. 
  • Starting in the US will allow Apple to make adjustments if needed for other markets, another said.

Apple is jumping on the “buy now, pay later” bandwagon, following in the footsteps of companies including Klarna and PayPal. 

The iPhone maker announced late last month that Apple Pay users based in the US would now be able to split purchases of between $50 and $1,000 into four payments with no interest and no fees. 

Jennifer Bailey, Apple’s vice-president of Apple Pay and Apple Wallet, said the move was a response to consumer demand for flexible payment options.

It’s being offered by Apple Financing, making it the first time Apple will handle tasks such as loans and credit assessments itself in a move Bloomberg last year called a significant shift. Other financial products, such as Apple’s credit card, have been handled by third parties such as Goldman Sachs.

Enhancing the Apple ecosystem

Select users are being invited to use a prerelease version of Apple Pay Later, with plans to widen access later this year.

Apple will not charge a fee for late payments, though they could still affect users’ credit scores.

Analysts say Apple Pay Later is more about increasing the convenience of Apple Pay and enhancing its ecosystem than an attempt to dominate the BNPL arena. 

Claire Holubowskyj of Enders Analysis told Insider: “Removing the friction from using BNPL in-store will be an important differentiator for consumers, particularly as in-store retail continues to return post-pandemic, and will give Apple a leg up on competitors.”

Apple likely to ‘tread cautiously’

She said Apple won’t be expecting a mass uptake of the offering given how fragmented the market is and how late they are to the party. Rolling out Apple Pay Later in one market will limit the risk by allowing the company to “assess performance and reevaluate if necessary,” Holubowskyj added. 

She pointed that Apple has a very healthy balance sheet will tens of billions of cash on hand. Neither is it suffering from the same over-hiring problem as other prominent tech companies.

Chris Brendler, a senior equity analyst for DA Davidson, said that while the move does makes sense for Apple, it’s still “a huge first step into leveraging its balance sheet, so we expect Apple to tread cautiously.”

It will also help Apple sell more devices, said Tom Forte, a senior research analyst for Brendler: “I see this effort as having the potential to increase demand for iPhones, including from consumers currently using Android devices.”

Apple dominates the US smartphone market with a 57% share, according to Counterpoint Research, but only accounts for 18% globally. It shipped almost 225 million devices last year, down from 237 million in 2021.  

‘Frictionless access’

Apple predicted in February that revenue would fall for a second consecutive quarter, but iPhone sales were likely to increase amid production returning to normal in China. 

CEO Tim Cook blamed the strong dollar, production problems in China, and the overall macroeconomic environment, per CNBC.

Holubowskyj believes Apple has an opportunity to benefit from Apple Pay Later by increasing uptake of Apple Pay down the line as it expands into other markets.

“Demand for credit will remain strong while prices are elevated, so immediate frictionless access to iPhone users will allow Apple to corner that particular market,” she said.

Apple didn’t respond to a request for comment from Insider.

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