How Apple Pay Later is going to change the consumer lending market

Apple is working on the new service that will allow consumers to pay for any Apple Pay purchases in installments. The company plans to partner with Goldman Sachs Group, a lender, to borrow funds needed for the installment plan. Goldman Chief Financial Officer Stephen Sherr said he believes there are “more opportunities to be had with Apple”. What opportunities does he talk about?

Apple’s game with Apple Pay Later is a long-term adoption of Apple Pay and Apple Card and their ecosystems. This proposition is the main competitor of the “buy now, pay later” service of Affirm and Afterpay companies. After the news was published, Affirm shares fell by 10%, Afterpay by 9.6%. However, Apple has no plans to compete with the aforementioned players. Apple focuses on Google, PayPal and Square. The question arises, how will they win their customers?

Let’s draw a parallel with Apple Pay. I really didn’t notice how instant phone payments became a habit. Every time at the checkout, I instinctively grab my phone and make a purchase with Apple Pay. A few seconds — and the terminal ringing is heard. It was the immediacy that was the key to the success of Apple Pay, and then Google Pay. Apple’s payment solution accounts for about 5% of global card transactions, with 1 in 10 of these payments planned to be processed by 2025.

I think that immediacy will play an important role for Apple Pay Later too. What’s more, Apple Pay can provide a strong distribution network that makes it easier for users to connect. Apple Card and Apple Pay products will lower the threshold for a BNPL service as consumers have become accustomed to Apple as a banking player of sorts. Last but not least, Apple controls huge digital marketplaces — in-house stores and global e-commerce through its websites. Simply put: Apple sells a lot of expensive products that would be good candidates to buy through Apple Pay Later.

I answer a reasonable argument that we can pull up a regular credit card into our Wallet and buy a product in installments using the same principle. But the process for using these solutions — BNPL and credit card — is vastly different. So, for example, through Apple Pay Later, you can apply online and get approved almost instantly. To get a credit card, however, a credit check is required. Here you should consider your own needs.

According to Worldpay’s Global Payment Report 2020, global BNPL transaction volume will grow by at least 54% over the next three years. Up until recently, Ukraine was not included in these statistics due to the lack of a transparent way to pay for purchases in parts on the financial market. Today in Ukraine we use the BNPL solution, which is provided by local ecommerce platforms. Apple’s service will likely be available only in the US at first. But the success of Apple Pay Later seems to me quite real, so we should expect it in Ukraine as well. Moreover, the company has already taken the first step towards cooperation with our country — it has opened an official office.

CEO of the international payment system LEO, the shareholder of IBOX Bank