Is Apple’s BNPL launch too late?

This morning at its 2022 Worldwide Developers Conference (WWDC), the computing giant introduced attendees to Apple Pay Later, a proprietary buy now pay later (BNPL) service. Goldman Sachs is the lender for the instalment loans.

Why should we care?
Apple Pay Later may be a serious contender to existing BNPL players like Klarna and Affirm. Apple’s doubling down on its fintech strategy, which is to leverage the ubiquity of its hardware to take a sizeable bite into competitors’ market share. Apple Pay Later is accepted anywhere Apple Pay is available—both through apps and on the internet—and developers and merchants don’t need to change anything in terms of how they accept payments. This makes BNPL onboarding far simpler for merchants, and can present a notable change to how many consumers interact with BNPL: as just another payment option within a familiar gateway, rather than a product that’s a wholesale alternative to the payment forms they already know. But the timing of the announcement is a cause for concern. As the Financial Times reported last week, BNPL is facing challenges to both its business model and valuation. “With buy now, pay later, there is a triple whammy [for the BNPL companies],” said Aman Behzad, Managing Partner at Royal Park Partners. “You have lower revenues, rising costs and deteriorating loan quality.” Klarna, previously the most valuable private fintech in Europe, is now laying off 10% of its workforce. What’s more, the Federal Reserve reports that more than half of consumers using BNPL use it to pay for goods and services they otherwise couldn’t afford; with tighter wallets and rising prices, BNPL could see greater defaults on its loans—which are already 70 times higher than they are for credit cards. In the medium term, Apple may see itself as a leader in BNPL, but hemorrhaging billions in the process.