By Sam Boughedda
In a note on Apple's (NASDAQ:AAPL) new buy now, pay later venture, Wells Fargo analyst Aaron Rakers said the move is explained by the company's “expand and monetize the ecosystem” strategy.
"We believe the more compelling reason Apple is launching payments/financial services is explained by its 'expand and monetize the ecosystem' strategy - with the main motive to increase customer loyalty, drive greater revenue per user, and improve the user experience/utility of its products/operating systems," said Rakers.
The analyst explained that Wells Fargo believes Apple’s interest in increasingly bringing payments processing, lending, and other tasks in-house is driven by the company’s desire for greater control over the user experience and an ability to more quickly deploy new products around the globe.
"We don’t expect the expansion of Apple’s payments ecosystem to drive material revenue/earnings for the company over the near to medium term, but believe the initiatives can be additive to customer loyalty, and expanding utility of being an Apple user - difficult to quantify metrics, but critically important in our opinion," wrote Rakers. "Additionally, we question whether these financing efforts could be tied to a future launch of a hardware subscription offering - i.e., something we believe is a less appreciated demand/upgrade driver that ultimately is born out of the company’s expanding payments/financial services capabilities."