The upcoming service could convince more users to use their iPhones to pay for items instead of standard credit cards.
Apple Inc. is working on a new service that will allow consumers to pay for any Apple Pay purchase in installments, rivaling the “buy now, pay later” offers popularized by the services of Affirm Holdings Inc. and PayPal Holdings Inc.
The upcoming service, known internally as Apple Pay Later, will use Goldman Sachs Group Inc. as a lender for loans needed for installment offers, according to people familiar with the matter. Goldman Sachs has been Apple’s partner for the Apple Card credit card since 2019, but the new offering is unrelated to the Apple card and does not require its use, said the people, who asked. not be appointed to discuss unadvertised products. .
The buy now, pay later system could help drive adoption of Apple Pay and convince more users to use their iPhones to pay for items instead of standard credit cards. Apple receives a percentage of transactions made with Apple Pay, generating additional revenue for the company’s more than $ 50 billion a year service activities.
The service is currently slated to work as follows: When a user makes a purchase through Apple Pay on their Apple device, they will have the option of paying for it either in four interest-free payments made every two weeks or over several months with interest. , said one of the people. The four payment plan is called “Apple Pay in 4” internally, while the longer term payment plans are called “Apple Pay Monthly installments”.
When making purchases through an Apple Pay Later plan, users will be able to choose any credit card to make their payments over time. The service should be available for purchases made in retail stores or online. Apple already offers monthly payments via the Apple Card for purchases of its own products, but this service would extend this technology to any Apple Pay transaction.
The interest rates Apple plans to charge for the monthly payments could not be learned. Affirm charges up to 30% APR, while other competitors charge less. The four interest-free payment plans would rival similar systems like those of Afterpay Ltd, Klarna Bank AB, and Sezgle Inc. in addition to PayPal’s popular Pay in 4 service.
Affirm fell 10% on the news on Tuesday, while PayPal recouped its losses to finish down just 0.6%. Afterpay fell 9.6% in Sydney on Wednesday morning.
Users who want to use the Apple Pay Later service will need to be approved through an app submitted through the iPhone’s Wallet app, where they can also manage their payments. Users will be required to submit a copy of their local ID card to apply for the program. Apple will also offer customers the option to exit payment plans to pay off the rest of their purchase balance.
At least some of the Apple Pay Later plans will also exclude late fees and processing fees, which will only cost users interest on longer-term plans. The service will also not require you to perform a credit check on the user. Separately, the company is also testing a feature that will allow users to create temporary Apple Pay Later digital credit cards for individual purchases.
Apple’s new service is still in development and its functionality could change or be canceled, people said. Apple and Goldman Sachs spokespersons declined to comment.
In an earnings call earlier Tuesday, Goldman CFO Stephen Scherr said he believed there were “more opportunities to be had with Apple.” Goldman’s alliance with consumer darlings like Apple aims to help him find a place in the world of consumer banking – an expansion he has sought in recent years to extend his reach beyond the world of high finance on Wall Street.
Apple’s iPhone payment service is accepted by 85% of all U.S. retailers, according to the company. The new service would mark one of the most significant additions to the service since its launch in 2014, after other features such as peer-to-peer payments. Apple last year acquired a company that developed technology that allows phones to receive payments by tapping another phone or credit card on its back, adding another potential feature to Apple’s payments roadmap. .
