How Apple's rumored 'Apple Pay Later' could prove lucrative

Posted:
in iOS
Apple's rumored extension to Apple Pay is seen as a potentially lucrative move because of who this type of buy now, pay later facility appeals to.


"Apple Pay Later" would be an extension to Apple Pay, and Apple Pay Cash


Apple has not announced that it will team up with Goldman Sachs to launch "Apple Pay Later," yet the very rumor has caused shares in rival firms to drop. As yet there are only a few players in the buy now, pay later (BNPL) market, but it's becoming increasingly profitable as worldwide spending habits change.

BNPL lets buyers spread the cost of purchases out over time, initially without accruing the kind of interest fees that most credit card companies charge.

According to the UK's Financial Times, BNPL is best for expensive purchases. The publication cites the Affirm BNPL company's partnership with Pelotron to spread the cost of it $1,900 bike as an example, Apple is also clearly in the business of selling costly devices.

Apple does already have the iPhone Upgrade Program which does this, but as yet there isn't an equivalent for all of its devices. Depending on how Apple decides to implement "Apple Pay Later" -- if it does -- then this could be a way to add that option to everything from Macs to AirPods.

Only, if BNPL is a way to make large-ticket items easier to buy, that's unfortunately not what people appear to be using it for. The Financial Times also says that users are taking advantage of the low initial cost to buy not one expensive item, but very many cheap ones.

So reportedly, while a fifth of the UK population has used BNPL in the year to March 2021, 90% of transactions have been for fashion and footwear.

Apple may be seeing "Apple Pay Later" as way to sell more of its own devices. But BNPL becomes profitable when the initial charge-free period ends.

For example, according to the Financial Times, the Klarna BNPL service currently offers credit at up to 18.9% APR when a user defers payments between 6 and 36 months. Similarly, Affirm can charge between 10% and 30% APR.

Apple Card was launched with the promise of making repayment easy, and also clear. "Apple Pay Later" would presumably do the same thing, but the prospect for credit misuse is such that the UK's Financial Conduct Authority wants to introduce regulations.

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Comments

  • Reply 1 of 19
    iOS_Guy80iOS_Guy80 Posts: 491member
    An Apple BNPL program could be in full operation by the release of Apple Car.
  • Reply 2 of 19
    crowleycrowley Posts: 8,279member
    Pelotron sounds like a Decepticon.
    davgreg
  • Reply 3 of 19
    crowleycrowley Posts: 8,279member
    Also, Apple's previous collaboration with Goldman Sachs, the Apple Card, is not available in the UK.  So what the UK FCA has to say about it may well be irrelevant if Apple BNPL never comes to the UK.
    wwinter86FileMakerFeller
  • Reply 4 of 19
    What would be lucrative would be for them to bring the card out in more countries such as the UK.
    Beatsioniclewatto_cobra
  • Reply 5 of 19
    larryjwlarryjw Posts: 811member
    "Lucrative" means financial processes and institutions rather than building stuff makes the money. It also means they're making money off of people who can't afford the products you're selling. 

    A few years ago, Macy's reported that 40% of their revenue came from their financing side. Again, people who couldn't afford Macy's products were jacking up Macy's. 

    It used to be that 10% of the US economy was the financing sector. Today, it's 50%. It's just money exchanges without building anything.

    No wonder BitCoin exists. 
    darkvaderFileMakerFellerwatto_cobra
  • Reply 6 of 19
    GeorgeBMacGeorgeBMac Posts: 9,889member
    What is driving this is places like GS can borrow as much cash as it wants at essentially zero interest and put it to use.
    BeatssconosciutobaconstangFileMakerFellerwatto_cobra
  • Reply 7 of 19
    tmaytmay Posts: 5,275member
    larryjw said:
    "Lucrative" means financial processes and institutions rather than building stuff makes the money. It also means they're making money off of people who can't afford the products you're selling. 

    A few years ago, Macy's reported that 40% of their revenue came from their financing side. Again, people who couldn't afford Macy's products were jacking up Macy's. 

    It used to be that 10% of the US economy was the financing sector. Today, it's 50%. It's just money exchanges without building anything.

    No wonder BitCoin exists. 
    That's false.

    https://global-macro-monitor.com/2019/06/05/americas-path-to-a-fire-economy/

    The entire FIRE sector (Finance, Insurance, Real Estate) is around 20%.




    sconosciutoroundaboutnowMplsPFileMakerFellerwatto_cobra
  • Reply 8 of 19
    larryjw said:
    "Lucrative" means financial processes and institutions rather than building stuff makes the money. It also means they're making money off of people who can't afford the products you're selling. 

    A few years ago, Macy's reported that 40% of their revenue came from their financing side. Again, people who couldn't afford Macy's products were jacking up Macy's. 

    It used to be that 10% of the US economy was the financing sector. Today, it's 50%. It's just money exchanges without building anything.

    No wonder BitCoin exists. 
    https://gizmodo.com/dogecoin-creator-says-crypto-is-a-scam-1847292956
    baconstangdarkvaderMplsPwatto_cobra
  • Reply 9 of 19
    baconstangbaconstang Posts: 736member
    Since when has lending money been "lucrative"?

    Oh yeah.  Since before money existed. 
    watto_cobra
  • Reply 10 of 19
    GeorgeBMacGeorgeBMac Posts: 9,889member
    larryjw said:
    "Lucrative" means financial processes and institutions rather than building stuff makes the money. It also means they're making money off of people who can't afford the products you're selling. 

    A few years ago, Macy's reported that 40% of their revenue came from their financing side. Again, people who couldn't afford Macy's products were jacking up Macy's. 

    It used to be that 10% of the US economy was the financing sector. Today, it's 50%. It's just money exchanges without building anything.

    No wonder BitCoin exists. 
    Yeh, we shifted into a consumer driven society propped up with an unsustainable health care system and a financial industry getting free money from the Fed -- while the government cuts revenue and increases spending.   According to the "Bond King Jeff Gundlach on CNBC:

    "DoubleLine Capital CEO Jeffrey Gundlach offered a dire long-term assessment on the U.S. dollar Thursday, telling CNBC in an interview he thinks the greenback is “doomed.”

    “Ultimately, the size of our deficits — both trade deficit, which has exploded post-pandemic, and the budget deficit, which is, obviously, completely off the charts — suggest that in the intermediate term — I don’t really think this year, exactly, but in the intermediate term — the dollar is going to fall pretty substantially,” Gundlach said on “Halftime Report.”

    “It’s a question of what your horizon is,” Gundlach said. “In the short term, the dynamics have been and will continue to be in place for the dollar to be marginally or moderately stronger.”

    “In the longer term, I think the dollar ... [is] doomed,” he added."


    The dollar was backed by gold.  Then, under Nixon, it went to the "Full Faith & Credit of the United States" -- backed by the world's mightiest industrial empire.   But the industry moved out.
  • Reply 11 of 19
    darkvaderdarkvader Posts: 540member

    The dollar was backed by gold.  Then, under Nixon, it went to the "Full Faith & Credit of the United States" -- backed by the world's mightiest industrial empire.   But the industry moved out.

    Let's not pretend gold has any significant inherent value.  You can't eat it, it's a lousy building material, and it's not any better for making clothing.

    Its only real value is that it's good for plating electronic connectors because it's corrosion resistant.

    No, gold is perceived to have significant value only because it's shiny.  It's in no way inherently better at being a currency than anything else, including the inherently useless crypto silliness.
    applguylarryjwbeowulfschmidt
  • Reply 12 of 19
    GeorgeBMacGeorgeBMac Posts: 9,889member
    darkvader said:

    The dollar was backed by gold.  Then, under Nixon, it went to the "Full Faith & Credit of the United States" -- backed by the world's mightiest industrial empire.   But the industry moved out.

    Let's not pretend gold has any significant inherent value.  You can't eat it, it's a lousy building material, and it's not any better for making clothing.

    Its only real value is that it's good for plating electronic connectors because it's corrosion resistant.

    No, gold is perceived to have significant value only because it's shiny.  It's in no way inherently better at being a currency than anything else, including the inherently useless crypto silliness.

    That's true.  But it's also only part of the truth.

    The value of gold as currency is its rarity.   And, that is also the fundamental feature of BitCoin:  it's hard and expensive to "mine" -- or at least it is using current technologies.
  • Reply 13 of 19
    MplsPMplsP Posts: 3,160member
    The Financial Times also says that users are taking advantage of the low initial cost to buy not one expensive item, but very many cheap ones.”

    This is the real problem - BNPL programs encourage irresponsible purchasing of items people don’t really need and can’t afford, then saddle people with fees they can’t afford. They are actually little more than a new twist on payday lending. The quoted ‘interest rate’ may be legal, but by using ‘fees,’ the true cost increase exponentially. They may not be illegal, but I would definitely call them socially irresponsible.
    FileMakerFellerwatto_cobra
  • Reply 14 of 19
    GeorgeBMacGeorgeBMac Posts: 9,889member
    MplsP said:
    The Financial Times also says that users are taking advantage of the low initial cost to buy not one expensive item, but very many cheap ones.”

    This is the real problem - BNPL programs encourage irresponsible purchasing of items people don’t really need and can’t afford, then saddle people with fees they can’t afford. They are actually little more than a new twist on payday lending. The quoted ‘interest rate’ may be legal, but by using ‘fees,’ the true cost increase exponentially. They may not be illegal, but I would definitely call them socially irresponsible.

    Very good, very interesting point.
    It opens the door to far deeper questions on personal responsibility, education, socioeconomic classes and so on.

    In short, I think somebody with poor or limited education, living in a lower socioeconomic class and living pay check to pay check would have a very different view on this from an MBA working as a VP in a major corporation.
    ... There are so many factors at play that it's almost impossible to grasp them all.
    FileMakerFellerwatto_cobra
  • Reply 15 of 19
    davidwdavidw Posts: 1,288member
    larryjw said:
    "Lucrative" means financial processes and institutions rather than building stuff makes the money. It also means they're making money off of people who can't afford the products you're selling. 

    A few years ago, Macy's reported that 40% of their revenue came from their financing side. Again, people who couldn't afford Macy's products were jacking up Macy's. 

    It used to be that 10% of the US economy was the financing sector. Today, it's 50%. It's just money exchanges without building anything.

    No wonder BitCoin exists. 
    Yeh, we shifted into a consumer driven society propped up with an unsustainable health care system and a financial industry getting free money from the Fed -- while the government cuts revenue and increases spending.   According to the "Bond King Jeff Gundlach on CNBC:

    "DoubleLine Capital CEO Jeffrey Gundlach offered a dire long-term assessment on the U.S. dollar Thursday, telling CNBC in an interview he thinks the greenback is “doomed.”

    “Ultimately, the size of our deficits — both trade deficit, which has exploded post-pandemic, and the budget deficit, which is, obviously, completely off the charts — suggest that in the intermediate term — I don’t really think this year, exactly, but in the intermediate term — the dollar is going to fall pretty substantially,” Gundlach said on “Halftime Report.”

    “It’s a question of what your horizon is,” Gundlach said. “In the short term, the dynamics have been and will continue to be in place for the dollar to be marginally or moderately stronger.”

    “In the longer term, I think the dollar ... [is] doomed,” he added."


    The dollar was backed by gold.  Then, under Nixon, it went to the "Full Faith & Credit of the United States" -- backed by the world's mightiest industrial empire.   But the industry moved out.
    Actually in 1968, before Nixon took office. But its demise began back in 1963.

    https://www.gold-traders.co.uk/gold-information/is-the-us-dollar-backed-by-gold.asp

    Remember silver certificates? Also an interesting history behind those dollars.

    https://www.investopedia.com/articles/markets-economy/090116/what-silver-certificate-dollar-bill-worth-today.asp
    watto_cobra
  • Reply 16 of 19
    The dollar was backed by gold.  Then, under Nixon, it went to the "Full Faith & Credit of the United States" -- backed by the world's mightiest industrial empire.   But the industry moved out.
    The military did not.
    watto_cobra
  • Reply 17 of 19
    Rayz2016Rayz2016 Posts: 6,837member
    Interesting thread. 
    watto_cobra
  • Reply 18 of 19
    GeorgeBMacGeorgeBMac Posts: 9,889member
    The dollar was backed by gold.  Then, under Nixon, it went to the "Full Faith & Credit of the United States" -- backed by the world's mightiest industrial empire.   But the industry moved out.
    The military did not.

    All that does is spend money and hurry the process.
    watto_cobra
  • Reply 19 of 19
    I think "potentially lucrative" in this context alludes to the fact that companies are depending on people not paying off the debt within the BNPL term.  Most of these BNPL contracts are written such that if the debt isn't completely paid off, if even a single penny (substitute the smallest value in your currency of choice) remains when the BNPL term expires, the borrower will be charged the contracted interest rate on the entire loan amount, not just the remainder.

    Had a finance company try to change me that interest even when I'd paid it off before the term.  When I called them about it, the conversation went something like this:

    Me: "I paid this off before the term, why are you charging me interest?"

    Finance Company: "Our records show that we didn't receive the payment until after the term expiration date, so we charged you the agreed upon interest, just as the credit contract specifies."

    Me: "My bank shows the check having been cashed the week before the due date."

    FC: "I'm sorry, but our records show..."

    Me: "My lawyer seems to think this constitutes something called 'credit fraud', and that there are additional penalties involved over and above simply cancelling the interest charge."

    FC: "..."

    FC: "Oh, I see where the mistake happened.  I'll take care of that right now."

    Me: "Thanks."
    GeorgeBMacwatto_cobra
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