Apple turns to third parties for 'buy now, pay later' after sunsetting product

 Although Apple is discontinuing its buy now, pay later service launched last year, the company is sticking with the product, with a successor to the offering launching later this year via third-parties like Affirm.

Buy now, pay later (BNPL) exploded in popularity as the Covid-19 pandemic forced more shoppers online, and the product has continued to resonate with consumers. BNPL loans drove US$75 billion (S$101 billion) in online spending in 2023, up 14.3 per cent from 2022, according to Adobe Analytics.

In a statement on Monday, Apple said its new solution "will enable us to bring flexible payments to more users, in more places across the globe in collaboration with Apple Pay-enabled banks and lenders." It did not comment further about why it was ending its independent BNPL offering.

Existing users of the BNPL service, Apple Pay Later will still be able to manage and pay open loans via the Wallet app, the company said.

Apple announced last week that Apple Pay users would be able to access new instalment loan offerings this fall, including the ability to apply for BNPL loans directly through Affirm when they cheque out with Apple Pay. Customers will also be able to access instalments from credit and debit cards, the tech giant said.

Analysts had viewed Apple's original BNPL product as a competitor to BNPL providers like Affirm. It offered customers the ability to buy products and pay in four interest-free instalments for items up to US$1,000. Affirm offers users the option to pay for products in two or four instalments, as well as monthly instalments for higher-cost items.

"To me, this sounds a lot like what we see happening with debit cards," said Sean Gelles, director of payments intelligence at J.D. Power. "Regardless of which debit card a consumer has funding their purchases, as long as they use Apple Pay, it's Apple that owns the experience."

Gelles added that if Apple's new portfolio of BNPL products are delivered via Apple Pay there would be "minimal risk for Apple as they will thereby retain the relationship with the customer."

While Apple could choose to partner with additional BNPL providers in the future — such as Affirm rival Klarna -- a source familiar with the matter highlighted Affirm's technology and underwriting expertise, as well as the company's choice to not charge users late fees.

Klarna declined to comment.

Shares in Affirm were last down 0.7 per cent on the day, a move that one analyst chalked up to weaker-than-expected retail sales data in May.

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