Apple’s Latest Fintech Move Is Buy Now, Pay Later Industry on the Edge

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

Jakub Porzycki | Nurfoto | Getty Images

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

The iPhone maker announced plans to launch its own “pay later” loans on Monday, expanding a range of financial services products that already include mobile payments and credit cards. Called Apple Pay Later, the service will allow users to pay in four equal installments, paid monthly without interest.

This puts BNPL players like PayPal, Affirm and Klarna in a tough 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 are down 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 the war in Ukraine and fears of a recession.

A triple whammy of rising inflation, higher interest rates and slowing economic growth have put the sector’s future in doubt. Rising borrowing costs have already made debt more expensive for some BNPL companies.

“It’s going to end up in trouble because the credit always has to roll out and get paid back,” Charles McManus, CEO of British fintech 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 cannot pay and therefore must be regulated. The UK is trying to pass regulation of the BNPL, while US regulators have opened an investigation into the sector.

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

Apple said it will handle loans and credit checks for Apple Pay Later through an in-house subsidiary, taking Goldman Sachs – which has previously worked with the company on its credit card – out of the equation. The move is a significant step that will give Apple a much bigger role in financial services than it currently does.

Sebastian Siemiatkowski, CEO of Klarna, said the launch of Apple Pay Later marked a “huge victory for consumers around the world”.

“Plagiarism is also the highest form of flattery,” he tweeted earlier this week.

Ken Serdons, commercial director at 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 fintech in3.

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

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

However, James Allum, senior vice president of Europe at payments firm Payoneer, said there is enough room in the market for several companies to compete.

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

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