Apple Pay Later — A New Niche Product With Limited Appeal

Last week, Apple launched Apple Pay Later, its much anticipated Buy Now Pay Later solution. But unlike other popular solutions such as Affirm, Afterpay, Klarna and PayPal’s ‘Pay in 4,’ Apple Pay Later has limitations. Let’s take a look at how Apple Pay Later is different and what it means for merchants.

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Apple Pay Later allows U.S. consumers to split purchases into four payments, spread over six weeks with no interest or fees. In that regard, it’s very similar to the other choices.

However, Apple Pay Later is only available for Apple products such as iPhones and iPads and shoppers can only apply for loans between $50 to $1,000 with merchants that accept Apple Pay.

“There’s no one-size-fits-all approach when it comes to how people manage their finances. Many people are looking for flexible payment options, which is why we’re excited to provide our users with Apple Pay Later,” said Jennifer Bailey, Apple’s vice president of Apple Pay and Apple Wallet.

“Apple Pay Later was designed with our users’ financial health in mind, so it has no fees and no interest, and can be used and managed within Wallet, making it easier for consumers to make informed and responsible borrowing decisions.”

With Apple Pay Later, shoppers can start the process by first applying for a loan through a soft credit pull that will enable Apple to evaluate if a buyer can afford to make these quick payments.

In that regard, it’s very different from its Apple Card, where consumers can take out much longer interest-free loans on iPhones and iPads as well as many other Apple products.

After a user is approved, the consumer will see the Apple Pay Later option when they select Apple Pay at checkout online or in the app on an iPhone or iPad.

Since Apple Pay Later is built right into the IOS Wallet, users can easily view, track, and manage all of their loans in one place. They can see how much they’ve paid and when the next payment is due.

Apple has launched a “prerelease version” in the U.S., and it will begin rolling out this option to more users over the coming months. Currently, Apple has not said if and when it plans to expand this program beyond the U.S.

Now that you have a brief look at how this program works, you can already see it’s very different from other popular Buy Now Pay Later programs that have become common over the past few years.

Apple Pay Later

Unlike Affirm, Afterpay, Klarna and PayPal’s ‘Pay in 4’ programs, Apple Pay Later is concentrating on more affordable products within its tiers of devices.

The company’s limits effectively limit the access of the product to iPhones and iPads below $1,000, which effectively kills almost half of its latest iPhone model, the iPhone 14, and eliminates its top iPad Pro devices.

When rumors about this program became public, many thought Apple could be upending the Buy Now Pay Later industry. But the final product is far from the killer app some thought it would be.

And considering the losses in this industry, it was probably wise for Apple to reduce access to a limited set of products from its own lineup.

Furthermore, Goldman Sachs, which underwrites most of Apple’s financial products, apparently is still losing money on its Apple ventures, rumored to be between $1 to $3 billion since the Apple Card launched.

So, for those of you who thought the Apple Pay Later program could be the stimulant to bring more Buy Now Pay Later consumers to the table, it doesn’t look like that will happen anytime soon, if ever.

The industry itself also appears to be changing a bit, with consumers opting to use Buy Now Pay Later programs for specific purchases. While the industry is still growing, the growth rate has slowed with companies making adjustments to the new reality.

Apple Pay Later is a niche product, maybe even designed to fit that new reality. While it will have some appeal, most consumers will continue to buy iPhone and iPad products through other means.