US finance regulator plans 'very careful look' at Apple Pay Later, similar services

The head of the US Consumer Financial Protection Bureau (CFPB) says the agency has concerns about Apple Pay Later and other Big Tech offerings entering the "buy now, pay later" (BNPL) lending business.

CFPB is already examining the BNPL market, with five existing players all now required to submit detailed information to the agency. Now according to the Financial Times, CFPB director Rohit Chopra, says that the regulator will also "have to take a very careful look [at] the implications of Big Tech entering this space."

The publication says that his comments were intended as a warning shot to Silicon Valley, specifically because of Apple's launch of its Apple Pay Later service.

Asked about the Apple launch, Chopra said that the entry of any Big Tech firm into short-term lending "raises a host of issues," particularly around the customer data that gets gathered.

"Is it being combined with browsing history, geolocation history, health data, other apps?" he said. "Big Tech's ambitions when it comes to 'buy now, pay later' are inextricably linked to the desire to dominate the digital wallet."

"Any tech giant that has a lot of control over a mobile operating system is going to have unique advantages to exploit data and ecommerce more broadly," he continued. Any such firm will keep pushing further into financial services, "to gain even deeper insights on consumer behavior."

China is a market that is already dominated by Big Tech firms offering financial services, such as Alipay and WeChat Pay. Chopra said he concerned that such services "intrusively" gain an "extraordinary window" into consumer behavior.

"I generally worry that we are lurching toward that type of system," he said.

The CFPB's initial report into the BNPL market players before Apple's entry, will be published in September.

Apple's services has been made part of its Apple Pay offering, with users able to split the cost of a transaction into four payments over six weeks.

15 Comments

22july2013 3725 comments · 11 Years

About 2 years ago

"Any tech giant that has a lot of control over a mobile operating system is going to have unique advantages to exploit data and ecommerce more broadly,"
If that applied to Apple, I would be concerned. Does it?

rob53 3307 comments · 13 Years

The biggest online Pay Later company has to be Pay Pal, not Apple Pay, so why aren't you including them in this article? Of course, every credit card company used on-line has always done this as their normal business.

larryjw 1036 comments · 9 Years

rob53 said:

The biggest online Pay Later company has to be Pay Pal, not Apple Pay, so why aren't you including them in this article? Of course, every credit card company used on-line has always done this as their normal business.

You are incorrect as to credit card companies. Loans by credit card companies are reported to the credit agencies. And, whether you agree with them or not, credit card companies have dispute resolution standards, consumers have protections.

BNPL may not have late fee policies, return policies, dispute policies.

CFPB points out that BNPL has similar markings to the old lay-away plans, but the difference are while layaway plans were typically used for the infrequent large purchases, BNPL encourages small quick purchases, ill-considered, encouraging accumulated debts.

Apple's offering is likely to be better than other systems as 1) their customer base is on the high end consumer, 2) they know a reasonable amount about their customers Apple debt level, 3) with the Apple Card, they dynamically keep their customers aware in the Wallet how much accumulating debt they have.

I have no idea about the other BNPL companies: Affirm, AfterPay, Klarna, PayPal, Zip, but I doubt their users have the ability track their debt load.

urahara 733 comments · 13 Years

And Visa and MasterCard exploit their advantage of being on the market so many years. Let’s fine them for that. /s

Seriously, every business has to have an advantage by some parameters over the competition, otherwise we wouldn’t need the diversity in business at all. Why is it such a big concern if a company has an advantage? Why? Why? Why?

ApplePoor 302 comments · 5 Years

Sounds like the regulators prefer the least economically secure folks face the 30 to 50% loan sharks (payday loans come to mind) instead.

In this case, does Apple bear the cost for non-payment? I believe the extra zeros in Apple's Trillions of dollars of assets listing covers any losses without any percentage change.