In a strategic shift, Apple has announced that it will discontinue its independent buy now, pay later (BNPL) service, introduced last year. Instead, the tech giant will partner with third parties, such as Affirm, to continue offering BNPL solutions to its users. This move aims to expand the reach of flexible payment options globally.
Transition to Third-Party BNPL Solutions
Apple’s decision to pivot from its in-house BNPL service to a third-party model comes as BNPL continues to gain popularity among consumers. The COVID-19 pandemic significantly boosted the demand for BNPL, driving $75 billion in online spending in 2023, a 14.3 percent increase from 2022, according to Adobe Analytics.
In a statement released on Monday, Apple emphasized that its new approach “will enable us to bring flexible payments to more users, in more places across the globe in collaboration with Apple Pay-enabled banks and lenders.” However, the company did not elaborate on the reasons behind ending its standalone BNPL offering.
Existing users of Apple Pay Later, Apple’s original BNPL service, will still be able to manage and pay off their loans through the Wallet app.
Expanding Flexible Payment Options
Starting this fall, Apple Pay users will gain access to new installment loan offerings, including the ability to apply for BNPL loans directly through Affirm at checkout. Additionally, customers will be able to use installment plans from their credit and debit cards.
Apple’s initial BNPL product was seen as a direct competitor to established BNPL providers like Affirm. It allowed customers to make purchases and pay in four interest-free installments for items up to $1,000. Affirm, on the other hand, provides options to pay in two or four installments, as well as monthly payments for higher-cost items.
According to Sean Gelles, director of payments intelligence at J.D. Power, Apple’s new BNPL portfolio, delivered via Apple Pay, poses minimal risk to the company. “Regardless of which debit card a consumer uses, as long as they use Apple Pay, it’s Apple that owns the experience,” he said. This approach ensures that Apple maintains its relationship with customers.
While Apple may consider partnerships with additional BNPL providers in the future, such as Klarna, a source familiar with the matter praised Affirm’s technology and underwriting expertise. Affirm also distinguishes itself by not charging users late fees.
Klarna declined to comment on the matter. Shares in Affirm were down 0.7 percent on the day, a drop attributed by analysts to weaker-than-expected retail sales data for May.
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