Apple’s growing financial services almost make it a bank

Apple will handle lending for its new buy now, pay later (BNPL) service and does not plan to shift that responsibility to a financial department, according to reports from Bloomberg and CNBC. The company’s subsidiary, Apple Financing LLC, would be licensed to provide lending services and will remain separate from Apple’s core business.

Apple announced its BNPL service, Pay Later, at its annual Worldwide Developers Conference (WWDC) on Monday. The service will allow users to make a purchase through Apple Pay and then pay that amount back in four equal installments over a six-week interest-free period.

This isn’t Apple’s first foray into finance, but, as Bloomberg note, this is his first time taking on financial responsibilities, including credit checks and loans. It currently partners with Goldman Sachs to perform these tasks for its Apple Card credit card, with the financial company playing a smaller, but not insignificant, role in Apple’s new Pay Later service. People will need to use the Apple Mastercard credit card, issued by Goldman Sachs, in order to use Pay Later. Bloomberg notes that Apple Financing does not have its own banking charter (so no, Apple is technically and legally not a bank).

According to CNBC, Apple will run soft credit checks when someone requests its Pay Later service. The outlet also reports that Apple won’t issue additional credit to users who miss payments, nor will they count towards a user’s overall credit score – Apple apparently won’t report not missed payments to credit bureaus. It’s unclear how much Apple will let users spend, but CNBC predicts that Apple Pay Later will have a cap of around $1,000. We also don’t know if Apple will charge late fees for missed payments, and the company didn’t immediately respond to The edgerequest for comment.

Apple’s move to consolidate financial services under one, albeit separate, roof points to a potentially tougher push into finance going forward. It also signals a larger goal of keeping users in its ecosystem. With Apple offering access to its card and the new Pay Later service from Apple Pay, you’re pretty much required to own and keep your iPhone to easily use most of its features. Pay Later is expected to roll out to customers in the United States first, with later expansion to other countries.

BNPL’s services have been criticized for the potential risk they pose to consumers, and Apple’s Pay Later is no exception. Customers who use these services are more likely to have an overdraft and many have difficulty repaying their loans. Existing BNPL services such as Klarna, Affirm and Afterpay have come under scrutiny from government regulators due to the potential risks they pose to consumers.


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