Apple Shakes Up the ‘Buy Now, Pay Later’ Industry

The Rise of “Buy Now, Pay Later”

If you’ve bought anything on the internet lately, you’ve probably noticed a button offering to spread your purchase over several payments.

This is called “buy now, pay later,” or BNPL. Companies including Affirm, Klarna, and Afterpay let you buy a product home immediately while you pay for it over time. These loans result in a soft credit check, which doesn’t affect your credit score, making them appealing to people who are working to build up their credit.

In a report from the Consumer Financial Protection Bureau, 17% of survey respondents said they’d used a BNPL service in the last 12 months.

Apple (AAPL) made waves in February by announcing it would report its BNPL loans to Experian, one of the three major credit bureaus in the United States. Equifax, Experian, and TransUnion were hoping Apple’s competitors would follow suit, but so far, they have not.

The worry: Consumers could be taking on massive debt that’s invisible to banks and other lenders

The Divide

If scored in the traditional way, BNPL loans could hurt consumers’ credit scores, according to Affirm, Klarna, and Afterpay, who don’t want to report their loans to credit bureaus.

The credit bureaus, however, say that if they could account for BNPL loans, consumers could build their credit over time by making their payments on time, and lenders would have a more accurate picture of how much debt people are actually holding as BNPL basically means buying something on credit.

Credit bureaus and BNPL firms are discussing how the credit reporting system could be revised. Meanwhile, a former Klarna exec founded Qlarifi, an alternative to the major credit bureaus that would collect data in real-time and may be more appealing to BNPL firms.

As the two sides hash out their differences, the “buy now, pay later” industry keeps growing. On Tuesday, Walmart announced it’s launching its own BNPL service and Reuters reported that Affirm has started offering BNPL loans for elective medical procedures.

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