Apple will manage credit for its Pay Later service

Apple will manage credit for its Pay Later service

Tech Highlights:

  • Apple CEO Tim Cook poses for a portrait next to a line of new MacBook Airs as he enters the Steve Jobs Theater during the Apple Worldwide Developers Conference (WWDC) at the Apple Park campus in Cupertino, California on June 6, 2022. A wholly owned subsidiary of Apple will check user credit and extend short-term loans to users for Apple Pay Later, the tech giant said. The new loan service, which will compete against similar offerings from Affirm and PayPal, was announced during Apple’s developer conference on Monday. Later this year, when the company’s new iOS 16 iPhone software is released, users will be able to buy products with Apple Pay and pay the balance off in four equal payments over six weeks as a buy now, pay later (BNPL) service.

  • According to Apple, a fully owned subsidiary would verify user credit and provide short-term loans to consumers for Apple Pay Later. Apple has worked with Mastercard, which talks with merchants and provides Apple with a white label BNPL product called Installments. Goldman Sachs, which is the official BIN sponsor and provides the Apple Card, is also participating as the technical issuer of the loans. On June 6, 2022, Apple CEO Tim Cook sits for a photo next to a line of new MacBook Airs as he enters the Steve Jobs Theater at the Apple Park site in Cupertino, California at the Apple Worldwide Developers Conference (WWDC).

Apple has partnered with Mastercard, which interacts with the vendors and offers a white label BNPL product called Installments, which Apple is using. Apple Card issuer Goldman Sachs also is involved as the technical issuer of the loans and is the official BIN sponsor, the company said. But Apple is not using Goldman’s credit decisions or its balance sheet for issuing the loans. The behind-the-scene structure of Apple’s new loan service, and the fact that it is handling loan decisions, credit checks and lending showcases the iPhone giant’s strategy to bring the framework and infrastructure for its financial services in-house as much as possible.

Apple has increasingly broken into the fintech industry, through its Wallet app and financial services that are centered on making its iPhone more valuable and useful to users, who will be inclined to continue to buy Apple hardware, which remains the company’s main source of sales.  The loans from Apple Pay Later are unlikely to be material to Apple in the short term, while suggesting the company could use its prodigious balance sheet to offer more financial services in the future. Apple reported $378.55 billion in revenue in 2021. Apple will run a soft credit check to ensure that borrowers are capable of paying back the loans, which will likely be capped at around $1,000, the company said. If Apple Pay Later loans aren’t repaid, then Apple will no longer extend those users credit. But the company said it won’t report the missed payments to credit bureaus. Apple will initially launch Pay Later in the United States. Apple Card, its other credit name, is currently only available in the U.S.

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