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Apple Takes a Step Back From Traditional Finances as It Announces Closure of Apple Pay Later

Not even a year after its launch, Apple has removed itself from the buy now pay later (BNPL) space, as it has announced that its Apple Pay Later product will no longer be supported.

In March 2023, Apple announced a new product which would let US customers make payments in four chunks over a six-week period. This would be serviced by Apple Financing. The product was rolled out to randomly selected users until October when it was made accessible to all across the country. However, the company will now no longer be offering Apple Pay Later as it has announced: ‘Apple Pay Later is no longer offering new loans. Existing Apple Pay Later loans and purchases are not affected.’

Although the move represents a retreat from traditional financial offerings, Apple has stated that Apple Pay users will still be able to make payments using debit and credit cards, and third-party providers for borrowing services.

Ash Lomberg, global VP strategic growth, Chargebee
Ash Lomberg, vice president, GTM EMEA, Chargebee

Explaining why this would be more beneficial for Apple, Ash Lomberg, vice president, GTM EMEA, Chargebee, the SaaS paytech said:  “By using a third-party provider for BNPL and other alternative payment methods (APMs),  Apple could streamline payment processing and avoid the complexities of managing multiple payment gateways.

“APM platforms can centralise transactions, integrate with existing software, automate billing, manage subscriptions, and support popular payment methods. This reduces errors and security issues, giving customers the options they want without the administrative headaches – allowing Apple to focus on what it does best.”

A short life
Tachat Igityan, CFO and founder of destream
Tachat Igityan, CFO and founder of destream

Offering one reason as to why the service may have been cancelled Tachat Igityan, CFO and founder of destream, a financial platform for content creators noted: “Apple has recently changed its strategy and focused on its current products, which generate the most revenue. For a long time, the company’s development model did not focus on new traditional products.

“However, as witnessed during the most recent developers’ conference, this has changed now – the corporation is now all about artificial intelligence (AI) integration.

“For firms like Apple, it is absolutely normal practice to test hypotheses and then abandon them if they do not work out accordingly.”

Why get involved?

According to Juniper Research, BNPL users are expected to reach 900 million worldwide by 2027. This would be a 157 per cent increase from 2022 when there were 360 million people across the globe using the service.

Furthermore, interest rates had not increased at the time of the launch announcement, suggesting that it would be a good time for Apple to make a name for itself in the lending space. However, rates have since risen, begging the question – is it still worth it?

Originally, it seemed that Apple Pay Later would act as a rival to other BNPL solutions. One such potential rival was Affirm. However, following the cancellation of the BNPL service, Apple has announced that it will partner with Affirm to offer consumers instalment loans at the point of purchase once iOS 18 is rolled out.

Survival of the fittest
Moshe Winegarten, chief revenue officer at payment service provider, Ecommpay
Moshe Winegarten, chief revenue officer at payment service provider, Ecommpay

While the increasing number of BNPL users may seem appealing, not everyone can get involved in the space explains Moshe Winegarten, chief revenue officer at payment service provider, Ecommpay: “It appears Apple has recognised the number of challenges in the BNPL space.

“Besides managing the credit risk and liabilities involved, the cost of funds has significantly risen since the project was conceived, most notably from high interest rates, and therefore the cost of providing this service is likely to be challenging, impacting on profitability.

“The news simply highlights the current challenges that existing players are finding in this space – as we have seen with the recent announcement of Laybuy going into receivership in Australia. Only a few players who can manage the risk properly and have an inexpensive source of funds to finance this can really succeed in the current market as it stands.

“Prolonged high interest rates have taken their toll and the sooner rates come down, the quicker pressure will ease on the cost of funds. Similarly, whilst the current economic crisis and rising cost of living have driven demand for BNPL, it has also impacted default rates and associated liabilities, which will hopefully change as the economic climate improves.”

Author

  • Francis is a journalist and our lead LatAm correspondent, with a BA in Classical Civilization, he has a specialist interest in North and South America.

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