This article was originally published in June 2022. We are reviving it today as Apple has he finally fulfilled his plans to launch the service.
Apple is getting into the buy now, pay later (BNPL) business with its new Pay Later service integrated into Apple Pay and Apple Wallet. While Apple advertises the service as “designed with users’ financial health in mind,” BNPL is a practice that has come under scrutiny by government regulators as something that could harm customers.
Apple’s Pay Later service, which has been in the works since at least last year, allows users to make a purchase with Apple Pay and then pay for it in four equal installments over the course of six weeks. There’s no interest in these fees, but it’s unclear if Apple will charge a late fee, and if so, how much it will cost.
On the surface, BNPL’s services seem harmless, as some come interest-free and allow for an easy way to pay for a large purchase in chunks. Some BNPL companies have even sprung up for payments related to health care, with some existing companies, such as Affirm, adding support, filling a gap for people who can’t pay for healthcare costs upfront. However, it is easy to abuse this type of service when used for non-essential purchases.
30 percent of users have difficulty making their BNPL payments
In May, sf gate published a disturbing report about BNPL’s services that highlights its popularity among Generation Z, or those born between 1997 and 2012. According to the report, 73 percent of BNPL’s customers are part of this generation, and about 43 percent of them report missing at least one payment. Other survey of debt hammer shows that 30 percent of users are having difficulty making their BNPL payments, with 32 percent reporting not paying rent, utilities, or child support to prioritize their BNPL bills. The current state of the economy is likely to contribute to some of these struggles.
sfgate it also points out that BNPL’s services can lead to larger purchases. According to data seen by the outlet, the average Affirm customer spends $365 on a single purchase, compared to the average cart size of $100 on record in 2020. It’s also become a way to shop for a wardrobe without paying per-cost. advance, with sfgate noting that Affirm’s large Gen Z consumer base spends 73 percent of their Afterpay purchases on fashion.
Like other payment systems, BNPL’s services can incur overdraft fees if users charge them to an account with insufficient funds, and Apple’s fine print makes it clear that it’s no exception. To make matters worse, The growing popularity of BNPL It comes at a time when the credit companies like to Experian, Equifax and TransUnion seek to include BNPL loans on credit reports. This means that failure to pay for these seemingly benign services will soon have a consequence, not only for consumers but also for BNPL businesses. AND a survey of 2,200 people conducted by Morning Consult reveals that BNPL users are twice as likely to overdraw compared to non-users.
Missed and late payments, coupled with a volatile economy, have pushed Klarna’s valuation to a reported fall by a third — from $46 billion last year to $30 billion — and has also caused Affirm’s stock price to drop. Last month, Klarna laid off 10 percent of its employees due to “a highly volatile stock market and a likely recession.”
“We do the right thing, even when it’s not easy.”
In addition to potential financial problems, BNPL’s services are attracting the attention of government watchdogs around the world. The Consumer Financial Protection Bureau is currently investigating BNPL companies, including Klarna, Zip, Afterpay, Affirm and PayPal, citing concerns about “debt accumulation, regulatory arbitrage and data harvesting in an already rapidly changing consumer credit market with technology.” Last year the UK announced stricter regulatory policies for BNPL companies.
Apple Pay Later is set to receive the same kind of scrutiny, as it injects itself into an uncertain sector as inflation soars and consumers struggle to pay for everyday goods. But it also normalizes BNPL’s practice by embedding the concept directly into the iPhone, which poses a risk to both consumers and competing companies. Apple has the power to capture the attention of the millions of iPhone users who use Apple Pay, while companies like Klarna, Affirm, and Afterpay clearly don’t have that kind of understanding.
Adding something as risky as BNPL to Apple’s brand puts Pay Later at odds with the company’s goal of providing customers with technology and services they can generally feel good about. Like the great quote from Apple CEO Tim Cook in Apple Ethics and Compliance Page says, “We do the right thing, even when it’s not easy.”
