Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Apple Enters BNPL Sector, Unveils Apple Pay Later

By BlackBull MarketsStock MarketsJun 15, 2022 06:26PM ET
www.investing.com/analysis/apple-enters-bnpl-sector-unveils-apple-pay-later-200625835
Apple Enters BNPL Sector, Unveils Apple Pay Later
By BlackBull Markets   |  Jun 15, 2022 06:26PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

Apple Inc. (NASDAQ:AAPL) is planning to offer buy now, pay later (BNPL) services in the US despite concerns of a potential market squeeze as more providers have a crack at the sector amid growing consumer borrowing and spending.

Apple intends to launch its BNPL offering later in 2022 through its Apple Pay mobile payment and digital wallet service. To be called Apple Pay Later, the offering will have the tech giant underwrite loans and provide funds for users, as well as absorb any losses incurred whenever borrowers miss their repayment obligations.

Apple's BNPL comes when the shares of fintech companies providing similar services have underperformed due to various concerns with the payment scheme. Some names that have underperformed S&P 500 financials recently are Affirm Holdings (NASDAQ:AFRM), Australia’s Zip Co. ASX:ZIP), PayPal (NASDAQ:PYPL) and Block Inc (NYSE:SQ), which acquired Afterpay. These names are making up a shrinking portion of the BNPL playing field; as more players enter the game, there are concerns about further market share and pricing squeezes.

Furthermore, other unique risks are associated with the service, credit-linked fears that have never been tested during a downturn. Amid all concerns, Apple obtained lending licenses through a subsidiary in most states, giving it the go-ahead to offer its brand of payment plans.

Competition heating up Around 2021, 14 companies have already launched BNPL services in the US. The country was leading the world in BNPL providers, followed by Europe. The appeal of the service has also infiltrated other markets, with growth observed in Australia, New Zealand, India, and other parts of Asia.

Despite all the risks associated, the sector is exhibiting no signs of slowing down. With plenty of established players already in the game, however, there seems to be limited space for fresh entrants — even when it is a big name like Apple.

In the US, most of the market is divided between Klarna, Afterpay, and Affirm, leaving other players to compete over around a quarter of the market. These three, plus PayPal, generated more than $3.2 billion combined revenue in 2021.

"The market for BNPL is maturing, and unless a new player has a differentiated approach and can offer additional services to both consumers and merchants, it will be tough for new entrants,"

Said Melissa Guzy, co-founder and managing partner at fintech-focused venture capital firm Arbor Ventures. The good thing for Apple is that it is not entirely new in the game. In 2021, it had a partnership with market leader Affirm. The partnership, which launched in Canada, allowed users of Affirm's PayBright to purchase Apple devices over a 12- or 24-month period.

"What is clear today is that a new entrant will need a significant amount of capital from the start for marketing and winning a position on the checkout page,"

Guzy noted. Some other relatively new players in the BNPL playing field are financial heavyweight Mastercard (NYSE:MA) and card network Visa (NYSE:V). There was also a spate of consolidations within existing players, including PayPal's $2.7 billion purchase of Japan-based BNPL platform Paidy and the former Square's $29 billion acquisition of Afterpay.

What of banks? With all the attention on the BNPL sector, one is left to wonder how traditional lenders play into this evolution of payment services. Well, they are not to be left behind, with many launching their BNPL services, especially as the growth of the sector is the shrinking of credit card volumes.

Banks are keen to tap into the market, and with mobile apps already in place, they are eager to capitalize on the client base. And why wouldn't they, right? According to Insider Intelligence, the BNPL offering will account for $680 billion worldwide transaction volume by 2025.

While participation in the sector is quickly becoming a necessity for lenders in danger of losing customers to these alternative forms of financing, it is still best to go about it in smart and strategic ways. Some lenders, such as Australia's Westpac Banking Corp (ASX:WBC), teamed up with existing BNPL service providers to get a feel of the sector.

Meanwhile, others are coming up with differentiated offers that appeal to customers, such as the Royal Bank of Canada and its PayPlan offering in partnership with digital payments company Bread. In the US, Barclays (LON:BARC) partnered with Amount to offer merchants point of sale (POS) financing under the merchant's brand.

Regardless of how they choose to do so, banks will certainly not miss out on the chance of riding the growing popularity of BNPL. They could not ignore the continuous growth of this payment scheme. Rather than resist it, the best play for traditional lenders is to find new avenues to stamp their brand and continue evolving with ever-changing technologies and customer behaviors.

Apple Enters BNPL Sector, Unveils Apple Pay Later
 

Is Apple Undervalued?

Based on 15 different premium valuation models, we calculate whether Apple stock is undervalued or overvalued every day. If you are considering Apple for your portfolio, you need to check this out:

See Fair Value Now
Unlock Apple's unbiased fair value with InvestingPro+

Related Articles

Apple Enters BNPL Sector, Unveils Apple Pay Later

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email