Seems like it's for those who may be just below being able to get a credit card but may be worthy of a bank taking a short 6 week risk on. Hopefully successful use of the program would allow the borrowers to build positive credit history to enable them to move on to better cards in the future. It makes no sense for anyone with established credit and good cash back or other bonus credit cards to use.
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Apple Pay Later Will Let You Pay for Purchases Through an Installment Plan With No Interest or Fees
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For more info about Buy Now, Pay Later (BNPL), CNBC has some good articles. Search for "BNPL"- this is still a new 'product' in the US, "without much regulatory oversight, the BNPL market currently exists in “a legal gray space,” according to Lux." There's not much actual data on the customer's behavior & usage, in particular default rates (how risky are these customers)?
Expect more US regulation. And with the US Federal Reserve Bank focus on taming inflation w/ more rate hikes, fewer companies will enter this space for it to be profitable or willing to take on the risk.
The merchants / stores are able to ring up higher purchase totals; the banks loaning out the money are making their money through late fees, etc. One of the big players, Klarna just laid off 10% off its workforce.
America's favorite pastime sport is shopping, and more shopping!
Expect more US regulation. And with the US Federal Reserve Bank focus on taming inflation w/ more rate hikes, fewer companies will enter this space for it to be profitable or willing to take on the risk.
The merchants / stores are able to ring up higher purchase totals; the banks loaning out the money are making their money through late fees, etc. One of the big players, Klarna just laid off 10% off its workforce.
America's favorite pastime sport is shopping, and more shopping!
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Good point...I was thinking about the money they make if the customer pays on time...the banks stand to make even more money on late fees, etc if the customer pays late. They only lose in a complete default which is probably relatively rare given the short terms and relatively low amounts of the funding.
Bleagh, now that it's clear what this product really is, it feels pretty unsavory for Apple to be getting involved with it.
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US pay schedules are typically either biweekly (26x/year) or semimonthly (24x/yr).
There are exceptions, but the above are the most typical.
What’s the catch? Financial institutions NEVER do anything out of the goodness in their hearts. If it works across all cards in your Apple Pay wallet does that mean Apple is assuming the debt until it’s paid off? And if so, what’s in it for them?
Pushing more and more people to buy stuff they can’t afford.
What are the fees for who ends up delaying the repayments?
Just another way to increase the revenue, which would be ok, if the line between business growth and ethic wasn’t getting more and more blurred.
What are the fees for who ends up delaying the repayments?
Just another way to increase the revenue, which would be ok, if the line between business growth and ethic wasn’t getting more and more blurred.
Apple, and merchants like Amazon, Walmart, Target are able to sell more to the customer (higher sales) -- they're paid up front by the Buy Now Pay Later provider for the full amount of merchandise. The retailers partner with the financial institutions / providers like Klarna, Affirm for the Buy Now, Pay Later portion. Those companies will be on the hook to collect the funds from the customer.
Because Americans want it right now -- instant gratification. Amazon Prime has also made Americans to expect items to arrive instantly within 2 days 😀
But isn’t this like peeing in your pants to become warm?
Well that would be the fiscally responsible thing to do... but so many people lack the discipline to do that.
(those with such discipline, as well as not spending everything they make, typically don't use buy-now-pay-later financing...)
That makes no sense from the lenders points of view. They are not going to report small term loans to the credit bureaus; that’s all but certain. This seems predatory to me; especially if a debit card or bank account is a mandated requirement so they can take the payments via auto draft. Have to see how it all works though.
I use this all the time with PayPal so will be awesome to use Apple Pay instead.
I agree that each purchase wouldn’t be reported as a loan issued and paid, but the whole account could be reported as a line of credit, with balance and payment history reported. It’s essentially a credit card account where each purchase has its own payment terms.
The AppleCard requires me to have my bank account on file for them to take the payments from, how would this be any different?
Paying cash when you can get an interest-free loan is not smart, financially speaking.
I can afford to buy anything that Apple currently sells in online store, but given the choice between paying all upfront, or paying over time, I would choose paying over time, every time, and I do.
Now, if there was a discount for cash, that would be a totally different story.
Have they published the terms of this anywhere? They said no interest or fees, but presumably that's only assuming you pay on time? If you miss an instalment there's going to be some kind of penalty?
In the US, it depends on the job/income source. In my experience, the most common distribution is fortnightly, but twice monthly is also very common (fortnightly, plus one or two days, usually the pay period will end on the 15th and the end of the month, common for salaried workers). Government assistance programs like EBT (food) and social security (old age and disability) tend to be monthly. Some places I’ve worked at have done weekly pay, this is mostly menial labor. Some places even do day-of pay, where you take money home daily (I’d assume these are mostly short term manual labor jobs). And when you talk self employment, there are all kinds of payment distributions. And this is the above ground economy, the white market. In the grey and black markets, there’s probably even more diversity in pay structures.
Presumably, yes. The question I had when they announced this is “what bank are they partnering with for this?” Under US banking regulations, for tech firms to offer a credit or debit card, loans, or savings accounts, they have to be a bank (and thus be subject to banking regulations, depositor’s insurance, and the like) or be partnered with one.
It’s probably not Apple assuming the debt but the firm backing the loan. I’d imagine they mostly intend to earn money on late fees. Firms like Affirm are already operating in the same space.
There's no info on that yet, but I suspect that interest/penalties will be charged, and the customer will lose access to the feature.