Introducing: Apple Pay Later

Breaking Down the Service

Apple (AAPL) has officially entered the Buy Now, Pay Later space, joining other checkout loan companies like Affirm (AFRM), Klarna, and AfterPay (SQ).

Apple Pay users will now be able to apply for Apply Pay Later loans at checkout to pay for purchases priced between $50 and $1,000. These loans can be used within apps or online with merchants that accept Apple Pay.

Once approved for the loan, users can pay for the purchase in four smaller payments over six weeks. The service charges no interest or fees, provided you repay your loan on time.

BNPL in the US

The Buy Now, Pay Later industry emerged relatively recently as an alternative for consumers who are unable or unwilling to use a credit card. At $43 billion, this market remains fairly small within the $6.6 trillion US retail market. However, Apple’s decision to enter the market could help speed up widespread adoption of BNPL.

Apple’s expansive ecosystem of products including iPhones, Macbooks, and Apple Pay could put the service in front of users who previously did not know it was an option. Additionally, as the biggest company in the world by market cap, Apple is less vulnerable to customers defaulting on these loans, a major pain point for many BNPL lenders.

Pros and Cons

Like with credit cards, Buy Now, Pay Later services offer an attractive way for cash-strapped consumers to make purchases. But, while these services can provide payment flexibility, they can also encourage you to overspend, hurt your credit, and potentially bury you in interest or fees if not used wisely. Although the service is free if you pay on time, data shows that 1 in 10 BNPL users are ultimately hit with fees.

On top of that, BNPL services don’t offer the same perks as credit cards, such as purchase protection or the potential to improve your credit score. This isn’t to say that you should never use a BNPL service. But, as Apple makes it easier than ever to buy now, it’s important to remember you’ll still have to pay later.

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