Apple’s recent introduction of its Buy Now, Pay Later (BNPL) service has aroused speculation about the company’s potential to provide financial services comparable to those offered by banks.
After entering BNPL (very much), Apple is now the new largest bank in the world,” stated Eddie Donmez, Director at Amplify Trading. “Apple has 1.8 billion active devices worldwide, which means their new bank will have 1.8 billion customers.”
According to Bloomberg, Apple Financing LCC, Apple’s wholly-owned subsidiary, would “oversee credit checks and make lending decisions for the service” through its new BNPL service.
According to the American newspaper, this is the first time Apple would handle financial tasks such as loans, credit assessments, and risk management. The technology giant historically depended on Goldman Sachs Group Inc for lending and credit assessment for its Apple credit card. However, Apple Financing LCC will have a higher say in such transactions.
On the other hand, Apple Financing does not have its bank charter, which means it is not a bank in legal terms. To use Pay Later, people will need to use Apple’s Mastercard-based credit card, which Goldman Sachs issues.
According to CNBC, when a person applies for Apple’s Pay Later Service, the company will do light credit checks. According to the site, Apple would not give further credit to users who miss payments, and missing payments will not affect a user’s overall credit score because Apple will not record missed payments to credit bureaus.
Apple hasn’t said how much users will be able to spend, but CNBC estimates that Apple Pay Later will have a $1,000 limit.
Apple’s decision to combine financial services under one, albeit separate, roof foreshadows a potentially more aggressive economic push in the future. It also alluded to a larger purpose of retaining consumers within the ecosystem.
With Apple Pay giving you access to your card and the new Pay Later service, you are pushed to purchase and maintain your iPhone to take advantage of most of its capabilities. Pay Later will first be available to clients in the United States, with plans to expand to other countries later.
Apple’s Pay Later is another BNPL tool that is questioned for the possible risk it poses to users. Customers who utilize these services are more prone to overdraw their accounts, and many have trouble repaying their debts.
Existing BNPL services like Klarna, Affirm, and government regulators have studied Afterpay because they represent customers’ hazards.