FILE – The Apple logo adorns the facade of the Brooklyn Apple store on March 14, 2020, in New York. Apple is entering the Buy Now, Pay Later space with a few tweaks to the existing model – including no option to pay by credit card. The company will offer the product to some buyers in the spring of 2023, and will begin reporting credit to credit bureaus in the fall. (AP Photo/Kathy Willens, File)
(NewsNation) – Apple is abandoning its “buy now, pay later” service, but shopping isn’t going away as the company turns to established players like Affirm and Klarna.
Apple announced earlier this month that it will allow banks to offer buy now, pay later plans through Apple Pay and Apple Wallet, according to the Associated Press. Affirm will be integrated into the Apple Wallet, meaning that Apple users can directly set up an Affirm account and use it through their digital wallet.
Although the tech company will no longer offer credit as a form of financing, Apple still collects money from banks when its cardholders use Apple Pay, according to an October Wall Street Journal report.
That’s important as Apple Pay has become the most popular digital wallet for in-store shoppers and is working to allow users to redeem rewards for their credit card partners, Axios reported.
Did it happen to Apple Pay Later?
Apple released its buy now, pay later, Apple Pay Later, in March 2023, allowing users to make four equal payments without interest or fees for purchases up to $1,000. Other brands such as Klarna and Affirm, however, have remained accessible and simple by being a payment method on millions of websites, the Associated Press reported.
Apple Pay Later, on the other hand, was only for merchants who accepted Apple Pay.
The project also meant that Apple needed a bank to provide the loans to customers. In the end, Goldman Sachs issued the Apple Card, meaning the bank had the final say on what it accepted and how much money it could use, according to the AP.
Those who have outstanding debts can manage them through Apple Pay.
Apple is still making money
Apple charges a fee to banks when cardholders use Apple Pay. The convenience of mobile payment services also increases consumer spending, compared to credit card payments, CBS reported, citing research by the Kenan-Flagler Business School at the University of North Carolina at Chapel Hill.
Credit card companies have opposed the added fees, however, and have tried to persuade Visa to change its handling of certain Apple Pay transactions, the Wall Street Journal reported, citing unnamed “people familiar with the matter”.
As of October, Visa planned to implement the change this year, despite Apple’s opposition, according to the Wall Street Journal.
The new plan will reportedly eliminate bank fees for automatic, recurring fees for services such as gym memberships and streaming subscriptions, according to the Wall Street Journal.
The success of Apple Pay
Despite the problems that Apple Pay later faced, Apple Pay as a whole has been successful since its release. It managed to overtake PayPal as consumers’ favorite digital wallet last year, according to research by the PYMNTS Intelligence group.
In early 2022, PayPal remained the most preferred digital wallet for consumers, but Apple Pay caught up, briefly overtaking PayPal in Q1 of 2023, according to PYMNTS data. By Q2 of 2024, 12% of consumers reported using a digital wallet to store their recent purchases. Of those customers, about 6% use Apple Pay, and 4% use PayPal.
Apple Pay also boasts five times the market share of Google Pay, Axios reported.
The increase in the use of Apple Pay is related to the growth of mobile sales.
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