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  • Frank Tian

Apple Late for the Pay Later Party

Apple rolled out its own BNPL product - “Apple Pay Later”.


It is a questionable move, given the timing and the strategic shift.



🚩 Lending for lower return?


Before Apple Pay Later, Apple has been fairly disciplined to avoid direct banking activities such as deposits and lending.


Why bother?


In 2021, the ROE of US banks is an okay 14% vs. Apple’s eye-popping 147%.


With BNPL, now Apply uses its own balance sheet for a low-return business.



🚩 Compete against own partners/clients?


Apple partners with Goldman Sachs for Apple Card. Previously it partnered with Barclay.


Apple Pay allows Apple to cut a slice of transaction fees from various credit/debit cards issued by banks.


Earlier this year, Apple purchased Credit Kudos in the UK, an open banking company with a credit reference agency license and credit decision engine. You would think Apple wants to engage lenders as clients, not competitors.


Banks are happy to tap into the population of loyal Apple fans, but they would feel different when the big tech directly competes with them.


Remember Google gave up the checking account initiative - it realized it did not make sense to compete with its own cloud clients.



🚩 Not enough attention from regulators?


In the US, CFPB recently renamed its innovation branch as “Office of Competition and Innovation”. It specifically called out big techs as potential threats to fair competition in consumer finance.


In May, the EU charged Apple breaks competition law by only allowing Apple Pay as the NFC wallet on iPhones.


Why draw more attention from regulators with a marginal business?


If you remember Facebook’s ambitious global coin Libra - sheer regulatory pressure forced a downgrade to a USD stablecoin Diem, which was abandoned eventually.



🚩 Crashing the party when it is over?


Apple comes in late for the BNPL fun, as the pandemic phenomena begin to recede.


Several factors create a challenging environment for pure BNPL:

  • Rising funding cost

  • Defensive plays from incumbents

  • Dwindling savings from consumers

  • Visible credit trades in credit reports

  • Slowly but surely coming regulations


If there is no money in the game, why bother with its own balance sheet, risk alienating partners/clients, and draw more attention from regulators?

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🎉 Apple No Show at BNPL Party

Apple Pay Later was nowhere to see in the iOS 16 release. When can you see it? Apple: Later. Why the delay? Per Mark Gurman from Bloomberg, “there have been fairly significant technical and engineerin

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