Apple’s pay later signals further move into financial services

Apple’s announcement that it planned to offer “buy now pay later” through its Wallet app might have taken some people by surprise. But it shouldn’t have. The new service, which is only available to US customers, for now, makes perfect sense — it is the next step in turning Apple into a financial services provider. That particular transformation was kicked off by the company in 2019 when Apple launched its own credit card for US customers.

One pandemic and a lot of economic turmoil later, things have changed. Buy now pay later services have invaded the market, offering short-term loans to people for relatively small amounts. And Apple’s new system essentially eats into that market.

Offering the ability to pay in instalments, with no fees or interest, the Pay Later service will work through Apple Pay. Customers will be able to split the cost of an Apple Pay purchase into four equal payments spread over six weeks. It is built into Apple Wallet, available everywhere Apple Pay is accepted both real world and online, and users can apply as they are checking out with Apple Pay, or in Wallet.

The service is yet another way to hook people into the Apple ecosystem, with easy credit at their fingertips. And it follows that some people may use it to spend on Apple products, though it will be by no means limited to this.

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The growth of BNPL services such as Klarna and Humm in Ireland, and AfterPay, Clearpay and Affirm further afield has proven there is an appetite for such services. They have proven particularly popular among younger consumers who want to avoid landing themselves with the potentially high-interest rates associated with credit cards.

But it is not without its risks. The growth of such services has been flagged by consumer advocates as a potential risk for consumers, normalising indebtedness for more trivial purchases and encouraging unsustainable spending.

Apple’s Pay Later service will have to avoid being tarred with similar concerns if the company wishes to avoid damage to its closely-guarded reputation.