Apple Pay Later May Not Affect Affirm and Afterpay in a Substantial Way, But Apple Has Much Bigger Goals in Mind

Last Updated on July 20, 2021

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Apple is working with Goldman Sachs to launch the Apple Pay Later (APL) service. Goldman has been Apple’s partner on Apple’s credit card, Apple Card, for two years now. There has been some talk about whether this “changes the game” in the Buy Now Pay Later corner of the fintech market. It may intensify the game, without fundamentally changing it. The existing players aren’t going to give up and blow away. 

What is more intriguing, with Apple (and, of late, Amazon) in the mix, the new wave of BNPL might change another game — it may threaten the old-fashioned credit cards and their issuers. 

The basics? APL isn’t tied to the Apple Card. Nor is its use specific to the purchase of Apple products. It is, though, tied in to Apple devices. Indeed, some commenters see it as a “way to squeeze more juice out of its 1B+ iPhone users.” When a user buys something on an Apple device, he will have the option to pay for it on one of two plans: four interest-free payments made at two week intervals, or interest-added payments stretched out over several months. 

There is no news yet on what interest Apple will charge on the monthly installments, for users who take that route.  

The Market 

The new wave of BNPL, into which Apple Pay Later now moves, is a space often associated with Affirm and Afterpay. 

Affirm started as a financial tech company in 2013 to operate as a lender of installment loans for consumers to use at point of sale with the benefit of the Affirm app. Five year later, it partnered with Walmart to allow the use of the Affirm app in Walmart stores and the giant retailer’s website. 

Affirm has also partnered with other retailers such as Shopify, BigCommerce, and Zen-Cart.  Affirm went public earlier this year (NASDAQ: AFRM). 

Afterpay is an Australian company (ASX:APT) with much the same business plan. It expanded into the US retail world in 2019.  .

Apple has followed Amazon by just two months into this “Buy Now, Pay Later” space. Like Apple, Amazon is a tech conglomerate that seems to be everywhere. Like Apple, too, Amazon is sometimes used as a “A” in the acronym “FANG” — with Facebook, Netflix, and Google. 

In May, Amazon launched its BNPL program, allowing online shoppers to pay for their goods in five installments, usually of equal size (with the last the smallest if the charge is not readily divisible by five). 

Affirm and Afterpay’s share prices both dropped
Affirm and Afterpay’s share prices both dropped after Apple’s move into the field became public knowledge. Photo credit:

Should Afterpay and Affirm Worry?

Afterpay and Affirm may have reason to worry after the “first movers” curse. It is a truism of marketing literature that it can be very risky to be the first to blaze a new trail. Appropriately, Apple itself is a common illustration of this point. In the late 20th century, in the mass marketing of computer software, Apple blazed the trail and Microsoft copied Apple, learning from the pioneer’s mistakes. 

In 1997, when Apple faced failure, Microsoft came to its rescue with a $150 million investment. Microsoft got good publicity for its corporate statesmanship (in the midst of antitrust litigation — it needed to show that it was not always a predator), and Apple made fine use of the investment, bouncing back to become the behemoth it is today.  

Affirm and Afterpay’s share prices both dropped after Apple’s move into the field became public knowledge.

But the good news for Affirm and Afterpay is that Apple has a bigger goal in mind: finding customers and driving them to the Apple Card. According to Forbes, “Apple [already] has about 50 million Apple Pay users and 6.5 million Apple Card holders. Apple Pay Later will be part of that world.

Consumer Credit is Changing

Affirm and Afterpay still have their admirers, and they seem unlikely to cede the field to Apple, Amazon, or anyone else without a fight. 

Afterpay, in particular, is hardly standing on its laurels. It is rolling out a brand extension, Money by Afterpay, an app that is said to assist users with money management and responsible spending. Perhaps the best answer to the first-movers’ curse is … to keep moving.  

The underlying fact behind all these developments is that the nature of consumer credit is changing. Consumers have become wary of the traditional plastic card, and are looking for alternatives. The BNPL accounts are attractive. 

With the new heavyweights in play, Amazon as well as Apple, the broader consumer-credit game is clearly changing. The plastic cards may have to innovate in order to  stay relevant.