Interesting times at Apple, as a crowd of fintech analysts forms to see how far Apple will wade into the deep end of the finance and banking lending pool. In the tech giant’s most recent announcement, they announced that loans initiated under the new Apple Pay Later BNPL product would be funded directly by Apple with the estimated $73 billion in cash they have on their balance sheet. In addition, Apple announced that they will also perform all credit decisioning through the newly-acquired Credit Kudos platform. The BNPL loans will be initiated through the Goldman Sachs platform using the Mastercard Installments product, and while not directly stated, it is presumed that Goldman will continue to handle all the operational and service aspects of both Apple Card and Apple Pay Later.
It is interesting to note that Apple is not starting this with their own products or in their own stores; Apple Pay Later will be available to any Apple cardholders at any merchants where they currently use Apple Pay or their Apple Card. As a tech company with no consumer lending experience, to go long in this environment amounts to a brisk walk through the shallow end of the pool and then ducking under the rope-and-floats to where it starts to get deeper. With BNPL loan volume soaring to what many credit analysts predict will be unsustainable levels, along with inflationary pressures and rising interest rates, this is one of the riskiest markets to launch a new a consumer lending product, especially for a company with no experience in the area.
This move into lending also makes us wonder if Apple really is going to establish themselves as a payfac to offer merchant services to iOS device uses, like Square (now a division of corporate parent Block) did when they pioneered their audio jack card reader over 10 years ago.
Overview by Don Apgar, Director, Merchant Services Advisory Practice at Mercator Advisory Group
