Apple has announced a substantial shift in its strategy within the burgeoning Buy Now, Pay Later (BNPL) sector. The company will discontinue its own Apple Pay Later service, which was launched in 2023, but remains dedicated to offering flexible payment solutions.
The BNPL market has seen remarkable expansion, especially during the COVID-19 pandemic, as online shopping surged. Adobe Analytics reported that BNPL loans facilitated a staggering $75 billion in online spending in 2023, marking a 14.3% increase from 2022. Recognising this trend, Apple initially developed its in-house BNPL service.
On Monday, Apple officially announced the discontinuation of Apple Pay Later, though the company did not specify the reasons for this decision. Nevertheless, Apple stressed its ongoing commitment to providing flexible payment options through a new strategy.
Apple is pivoting towards collaboration with established BNPL providers such as Affirm. This autumn, Apple Pay users will be able to access a broader range of instalment loan options directly through Apple Pay. This includes the ability to apply for BNPL loans via Affirm at the point of checkout. Customers will also have the option to use instalment plans offered by their credit and debit cards.
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Previously, Apple Pay Later was seen as a direct competitor to established BNPL providers like Affirm. Apple’s original service offered interest-free, four-part instalments for purchases up to $1,000. Affirm, meanwhile, provides options for splitting payments into two, four, or monthly instalments, catering to higher-priced items.
Sean Gelles, a payment intelligence expert at J.D. Power, likens Apple’s new strategy to the existing debit card model. Regardless of the specific debit card used, Apple Pay handles the transaction, maintaining control over the user experience. Gelles highlights that by integrating BNPL options within Apple Pay, Apple reduces risk while keeping customer relationships within its ecosystem.
While Apple might partner with other BNPL providers like Klarna in the future, initial reports underscore Affirm’s strengths as a partner. Insiders note Affirm’s advanced technology, expertise in underwriting, and policy of not charging late fees as decisive factors. Klarna declined to comment on these developments.
Following the announcement, Affirm’s stock price experienced a slight decline of 0.7%. Analysts attributed this dip more to weaker-than-expected retail sales data released in May rather than Apple’s strategic shift.
Apple’s new strategy offers greater flexibility for users, but some questions remain unanswered. It is unclear whether Apple will expand its BNPL partnerships beyond Affirm or what specific terms will be offered through these partnerships.
