Apple Using In-House Lending for New Apple Pay Later Feature

[MacRumors]

Alongside iOS 16 and macOS Ventura, Apple announced the upcoming launch of a new Apple Pay Later feature, which is designed to allow customers to split Apple Pay purchases into multiple payments.

With Apple Pay Later, Apple Pay users can choose to make four payments spread over a six week period instead of paying up front. The Apple Pay Later feature includes no interest or fees so long as customers make the four payments within the allowed period.

Apple has partnered with Goldman Sachs and other companies for past financial ventures, but according to Bloomberg, Apple plans to take on the lending for the Apple Pay Later feature. Apple has launched a subsidiary, Apple Financing LLC, to handle credit checks and make decisions on loans for the service.

Apple Financing LLC operates separately from Apple, and as Bloomberg notes, this is the first time that Apple has opted to deal with financing itself. Goldman Sachs still has a role in the program, however, as it issues the Mastercard payment credential used to complete Apple Pay Later purchases as Apple Financing doesn't have a bank charter.

Bloomberg back in March said that Apple was working on a multiyear plan to bring its financial services in house, cutting out the need for partners like Goldman Sachs. Apple is working on payment processing technology and infrastructure such as lending risk assessment, fraud analysis, credit checks, and dispute handling, plus it is working on tools for calculating interest, rewards, approving transactions, reporting data to credit bureaus, increasing credit limits, and more. The Apple Pay Later feature is its first effort, but Apple may also use Apple Financial to handle other future services like the hardware subscription service that is in the works.

Apple Pay Later has been in development for more than a year, and it is similar to PayPal's Buy Now, Pay Later feature that also allows for payments broken down into installments. At the current time, Apple Pay Later is limited to the United States.

Article Link: Apple Using In-House Lending for New Apple Pay Later Feature

 

[Neepman]

Payday loan schemes can't be too far behind.

 

[macfacts]

Or live within your means.

 

[oofio2461]

or Apple Pay Now?

 

[KaliYoni]

Well, this is one productive way Apple can deploy its massive cash holdings. A lot of shareholders, though, might prefer a dividend increase or stock buybacks.

Further, I wonder if Apple Financing LLC is structured so that Apple also avoids repatriating and paying US taxes on all the $$$ it has parked in various non-US jurisdictions.

There is a definite PR benefit. No visible ties to Wall Street investment banks means knee-jerk Goldman Sachs haters can start spreading out purchase payments without any dissonant feelings. ;-)

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ETA: the Bloomberg story says Apple Pay Later uses a Goldman-issued Mastercard number as part of the transaction. This allows Apple to sidestep any state or federal bank regulation (it sounds like Apple Financing LLC is regulated at the state level as either a money transfer service or a payday lender, both of which benefit from much less stringent regulation than banks).

From a strategic perspective, moving into non-bank financial services during a period when capital is no longer chasing yield, due to higher interest rates, VC activity is reduced, and IPOs are difficult could allow Apple to dominate a lot of currently unregulated or lightly regulated fintech sectors relatively cheaply and easily.

 

[antiprotest]

This is just the beginning. Eventually Apple will go into weapons and construction, and then establish its own nation.

 

[appleguy123]

Never used one of these micro loan services that offer payments at zero interest. If you pay them off, does it help your credit score? Or are they score-neutral?

 

[iGeneo]

Score neutral

I’ve used them all the time. When i can use someone else’s money for free, I always will. They take payment automatically so I’m never late.

 

[now i see it]

Our products too expensive? No problem! We’ve got a payment plan for you!

 

[Apple_Robert]

I am not about to apply for a loan to spread payments to 6 weeks. I could pay all at once but, the idea that I could spread it out without interest was appealing.

 

[jimbobb24]

Probably Apple getting their feet wet in the financial world in a relatively safe way. I don’t know what I would need to buy that 6 weeks of splitting up the payment would help but I am glad for those that benefit from this and take some stress out of their paycheck. Especially with inflation it made things really hard on a lot of people…oh wait…I can use this to fill up my gas tank.

 

[adamw]

Apple makes money selling you new products. Uses some of its "piles of cash" to help drive sales.

 

[v0lume4]

The modern day company store?

 

[jav6454]

Apple shifting into the financial sector? While this wasn't foreseen, it remains interesting.

 

[AppleFan1998]

That’s nice, getting into another line of business, that means there’s more profits but it would be under a different LLC.

 

[jprmercado]

Interesting to see where Apple is headed in terms of financial services. Right now, banks are Apple’s partners. Eventually, they might become competitors.

 

[_Spinn_]

How long before we get iBank from Apple? 😂

 

[Mr. Dee]

This is just the beginning. Eventually Apple will go into weapons and construction, and then establish its own nation.

People here on the forums laughed at me a few months ago when I said Apple is gonna build a community with Apple branded homes. It’s gonna be an exclusive and they will do significant background check to determine if you can live in a Apple community.

 

[turbineseaplane]

People here on the forums laughed at me a few months ago when I said Apple is gonna build a community with Apple branded homes. It’s gonna be an exclusive and they will do significant background check to determine if you can live in a Apple community.

That sounds awful honestly

 

[BruiserB]

So I'm guessing it works like this....

To the merchant it just looks like a MasterCard purchase and they pay their fees for accepting credit purchases.

To Goldman Sachs it's run a lot like the AppleCard. They pay some amount to Apple; I'm going to guess 2% of the transaction because that's what gets returned to customers as AppleCash now.

Apple lends their money, but pockets 2% on what is effectively a 3 week loan. The weighted average of the 4 payments over 6 weeks is effectively the same as lending all of the money for 3 weeks.

(365/21) * 2% = 34.8% annual rate of return on Apple's money.

From that they have to manage defaults, but they also get the potential to collect late fees, etc. for missed payments. They probably share fees with Goldman and/or MasterCard.

I can see how it's an attractive business model, but still seems slimy for Apple to put their name on.

 

[Shreducator]

I can’t remember who said this but if you can’t afford to buy it twice you can’t afford it.

 

[appleguy123]

That’s nice, getting into another line of business, that means there’s more profits but it would be under a different LLC.

I don’t think Apple is going to get into interest bearing loans. It’s a way to use the cash stockpile to increase sales. As soon as companies start to add interest to these buy-now-pay-later micro-loan services I think the public will stop using them. If Apple was planning to profit directly from this service, they wouldn’t make an LLC for it. The LLC let’s this company lose money giving interest free loans that are subsidized by Apple’s margins.

 

[FelixDerKater]

Soon enough they will have rewards schemes like the airlines.

 

[Gsmaniac]

Surely this Apple Pay later is only for Apple Card holders? I can’t imagine them wanting to deploy this for everyone who uses Apple Pay regardless of their bank provider.

 

[Apple_Robert]

I can’t remember who said this but if you can’t afford to buy it twice you can’t afford it.

Whomever made such a statement was wrong.