How Apple's rumored 'Apple Pay Later' could prove lucrative

"Apple Pay Later" would be an extension to Apple Pay, and Apple Pay Cash

Apple has not announced that it will team up with Goldman Sachs to launch "Apple Pay Later," yet the very rumor has caused shares in rival firms to drop. As yet there are only a few players in the buy now, pay later (BNPL) market, but it's becoming increasingly profitable as worldwide spending habits change.

BNPL lets buyers spread the cost of purchases out over time, initially without accruing the kind of interest fees that most credit card companies charge.

According to the UK's Financial Times, BNPL is best for expensive purchases. The publication cites the Affirm BNPL company's partnership with Pelotron to spread the cost of it $1,900 bike as an example, Apple is also clearly in the business of selling costly devices.

Apple does already have the iPhone Upgrade Program which does this, but as yet there isn't an equivalent for all of its devices. Depending on how Apple decides to implement "Apple Pay Later" — if it does — then this could be a way to add that option to everything from Macs to AirPods.

Only, if BNPL is a way to make large-ticket items easier to buy, that's unfortunately not what people appear to be using it for. The Financial Times also says that users are taking advantage of the low initial cost to buy not one expensive item, but very many cheap ones.

So reportedly, while a fifth of the UK population has used BNPL in the year to March 2021, 90% of transactions have been for fashion and footwear.

Apple may be seeing "Apple Pay Later" as way to sell more of its own devices. But BNPL becomes profitable when the initial charge-free period ends.

For example, according to the Financial Times, the Klarna BNPL service currently offers credit at up to 18.9% APR when a user defers payments between 6 and 36 months. Similarly, Affirm can charge between 10% and 30% APR.

Apple Card was launched with the promise of making repayment easy, and also clear. "Apple Pay Later" would presumably do the same thing, but the prospect for credit misuse is such that the UK's Financial Conduct Authority wants to introduce regulations.

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