Apple Pay Later will be launched in the US in September.
With widespread layoffs and regulatory concerns, other BNPL providers are falling.
Apple has recently announced its plans of launching Apple Pay Later in September. Though the company did not use the term 'buy now, pay later' the upcoming service will allow consumers to pay in four installments over six weeks, making it a BNPL service.
The popularity of the BNPL industry has exploded tremendously in a short period: it grew from $33 billion in 2020 to $120 billion last year, according to GlobalData. The industry is now expected to grow at an annual rate of 26 percent.
Apple is known for entering markets with clear opportunities and potential growth, and its move into BNPL consumer finance now proves the same. Though it can legitimize the services of the relatively new industry, Apple’s market dominance can threaten the existence of the existing players.
“Apple devices are the gateway for many consumers shopping online. The more seamlessly they can integrate into the shopping experience, the less likely customers are to use other services,” Alykhan Sunderji, the Chief Council at Sunder Legal, told Finance Magnates.
And, Apple is following exactly this strategy. The tech giant is going to integrate its pay later services into its existing Apple Pay services. The service will require a 'soft' credit check of the consumer and a review of their transaction history with Apple.
Shannon Vissers, a Retail and Shopping Analyst at MerchantMaverick.com, explained: “Apple will have a competitive advantage, since its BNPL product makes it even easier for Apple users to take out a BNPL loan; for existing Apple Pay users, Apple's Pay Later will be just another effortless payment option that appears in your Apple Wallet.”
Advantage: Fair or Unfair?
The dominance of Apple Pay in the United States’ retail payments space will further push the Pay Later service. The number of Apple Pay users was estimated to be 507 million globally in 2020 after gaining 66 million that year. In addition, it captures 43.9 percent of the mobile payments market in the United States.
All these metrics clearly indicate that Apple Pay Later will have a major advantage in the BNPL sector.
Moreover, unlike Apple, most of the BNPL providers usually rely on their partnerships with other payment providers and e-commerce platforms. If those deals go sour, those platforms would lose their market share overnight. However, this is not even a concern for Apple Pay Later, as the tech giant has created a massive ecosystem over the years.
“But, [Apple Pay Later] won’t necessarily kill the BNPL business,” said Sunderji.
“We often see multiple checkout options on an e-commerce website because customers have different preferences. I think we will continue to see multiple options for BNPL, and these options will drive healthy competition to please customers.”
Interesting Timing
Additionally, Apple is launching its BNPL services when the majority of the industry is struggling. Affirm, which is one of the biggest BNPL players, has lost 3/4 of its stock value since the beginning of the year, and Klarna laid off 10 percent of its workforce in May.
Now, Apple’s move into space has pushed these BNPL stocks even lower.
Shannon Vissers, a Retail and Shopping Analyst at MerchantMaverick.com
“The more players there are in the industry, the harder it will be for each BNPL product to stand out from its competitors,” Vissers added. “It remains to be seen which players will remain standing in the end, but I think a year from now there will be fewer BNPL players than there are now. It's also not out of the question that Apple, PayPal, and/or Block might acquire and absorb some of their BNPL competitors.”
Upcoming Regulations
Regulation is another concern for the BNPL industry. The industry is now unregulated, but regulators actively considering tightening the industry.
One of the regulatory areas would be checking the financial history of potential consumers before allowing BNPL services. Apple has a clear advantage here.
Alykhan Sunderji, Chief Council at Sunder Legal
“When Apple uses its own data to make a credit decision, it doesn’t have to comply with various regulations under the Fair Credit Reporting Act (like sending a formal notice if someone has been denied credit). But, we’ve seen that whenever consumers are offered easy credit in an unregulated environment, disaster is not far away,” said Sunderji.
Despite Apple’s entrance into the industry, the retail payment markets are too big. Apple Pay is dominant in the US and some other countries, but several local payment modes still dominate in Europe, Asia and other parts of the world.
“There are myriad factors working against BNPL at the moment: looming regulations, too many companies offering a nearly identical product, rising public skepticism of BNPL as we discover how financially harmful these products are to young consumers, rising interest rates and the increasingly real prospect of a recession in the coming months,” added Vissers.
“All that said, I don't think BNPL will disappear entirely. In a few years, there will still be two or three big BNPL players (likely including Apple), though the products will be more carefully regulated.”
Apple has recently announced its plans of launching Apple Pay Later in September. Though the company did not use the term 'buy now, pay later' the upcoming service will allow consumers to pay in four installments over six weeks, making it a BNPL service.
The popularity of the BNPL industry has exploded tremendously in a short period: it grew from $33 billion in 2020 to $120 billion last year, according to GlobalData. The industry is now expected to grow at an annual rate of 26 percent.
Apple is known for entering markets with clear opportunities and potential growth, and its move into BNPL consumer finance now proves the same. Though it can legitimize the services of the relatively new industry, Apple’s market dominance can threaten the existence of the existing players.
“Apple devices are the gateway for many consumers shopping online. The more seamlessly they can integrate into the shopping experience, the less likely customers are to use other services,” Alykhan Sunderji, the Chief Council at Sunder Legal, told Finance Magnates.
And, Apple is following exactly this strategy. The tech giant is going to integrate its pay later services into its existing Apple Pay services. The service will require a 'soft' credit check of the consumer and a review of their transaction history with Apple.
Shannon Vissers, a Retail and Shopping Analyst at MerchantMaverick.com, explained: “Apple will have a competitive advantage, since its BNPL product makes it even easier for Apple users to take out a BNPL loan; for existing Apple Pay users, Apple's Pay Later will be just another effortless payment option that appears in your Apple Wallet.”
Advantage: Fair or Unfair?
The dominance of Apple Pay in the United States’ retail payments space will further push the Pay Later service. The number of Apple Pay users was estimated to be 507 million globally in 2020 after gaining 66 million that year. In addition, it captures 43.9 percent of the mobile payments market in the United States.
All these metrics clearly indicate that Apple Pay Later will have a major advantage in the BNPL sector.
Moreover, unlike Apple, most of the BNPL providers usually rely on their partnerships with other payment providers and e-commerce platforms. If those deals go sour, those platforms would lose their market share overnight. However, this is not even a concern for Apple Pay Later, as the tech giant has created a massive ecosystem over the years.
“But, [Apple Pay Later] won’t necessarily kill the BNPL business,” said Sunderji.
“We often see multiple checkout options on an e-commerce website because customers have different preferences. I think we will continue to see multiple options for BNPL, and these options will drive healthy competition to please customers.”
Interesting Timing
Additionally, Apple is launching its BNPL services when the majority of the industry is struggling. Affirm, which is one of the biggest BNPL players, has lost 3/4 of its stock value since the beginning of the year, and Klarna laid off 10 percent of its workforce in May.
Now, Apple’s move into space has pushed these BNPL stocks even lower.
Shannon Vissers, a Retail and Shopping Analyst at MerchantMaverick.com
“The more players there are in the industry, the harder it will be for each BNPL product to stand out from its competitors,” Vissers added. “It remains to be seen which players will remain standing in the end, but I think a year from now there will be fewer BNPL players than there are now. It's also not out of the question that Apple, PayPal, and/or Block might acquire and absorb some of their BNPL competitors.”
Upcoming Regulations
Regulation is another concern for the BNPL industry. The industry is now unregulated, but regulators actively considering tightening the industry.
One of the regulatory areas would be checking the financial history of potential consumers before allowing BNPL services. Apple has a clear advantage here.
Alykhan Sunderji, Chief Council at Sunder Legal
“When Apple uses its own data to make a credit decision, it doesn’t have to comply with various regulations under the Fair Credit Reporting Act (like sending a formal notice if someone has been denied credit). But, we’ve seen that whenever consumers are offered easy credit in an unregulated environment, disaster is not far away,” said Sunderji.
Despite Apple’s entrance into the industry, the retail payment markets are too big. Apple Pay is dominant in the US and some other countries, but several local payment modes still dominate in Europe, Asia and other parts of the world.
“There are myriad factors working against BNPL at the moment: looming regulations, too many companies offering a nearly identical product, rising public skepticism of BNPL as we discover how financially harmful these products are to young consumers, rising interest rates and the increasingly real prospect of a recession in the coming months,” added Vissers.
“All that said, I don't think BNPL will disappear entirely. In a few years, there will still be two or three big BNPL players (likely including Apple), though the products will be more carefully regulated.”
Arnab is an electronics engineer-turned-financial editor. He entered the industry covering the cryptocurrency market for Finance Magnates and later expanded his reach to forex as well. He is passionate about the changing regulatory landscape on financial markets and keenly follows the disruptions in the industry with new-age technologies.
Alipay+ Expands Global Reach Amidst UEFA EURO 2024 Surge
Sherwan Zeybo | FXGT | Executive Interviews
Sherwan Zeybo | FXGT | Executive Interviews
In this video, Sherwan Zeybo, Head of Business Development at @fxgtofficial , discusses the growth and development of the CFD broker since its inception in 2019. Starting with a small team, FXGT has expanded to over 280 employees and obtained multiple licenses across various jurisdictions. Sher highlights the broker's commitment to providing security, transparency, and a comprehensive trading environment for clients. Sherwan also mentions upcoming developments, including a new trading app and a web trading platform, as well as a copy trading and social trading platform.
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In this video, Sherwan Zeybo, Head of Business Development at @fxgtofficial , discusses the growth and development of the CFD broker since its inception in 2019. Starting with a small team, FXGT has expanded to over 280 employees and obtained multiple licenses across various jurisdictions. Sher highlights the broker's commitment to providing security, transparency, and a comprehensive trading environment for clients. Sherwan also mentions upcoming developments, including a new trading app and a web trading platform, as well as a copy trading and social trading platform.
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In our discussion with Rhonda K. Müller, CEO of Muinmos, during iFX EXPO International, she covered regulatory changes impacting the trading industry, particularly focusing on new frameworks like MICA and Dora. She highlights the positive effects of regulation, such as increased order and transparency, and predicts that these changes will ignite more competition in the crypto market. Rhonda also touches on the rising trend of prop trading and anticipates future regulations in this area to ensure legitimacy. Finally, she shares Mooz's commitment to digitization and connectivity, aiming to provide comprehensive solutions from investor protection to risk profiling.
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In our discussion with Rhonda K. Müller, CEO of Muinmos, during iFX EXPO International, she covered regulatory changes impacting the trading industry, particularly focusing on new frameworks like MICA and Dora. She highlights the positive effects of regulation, such as increased order and transparency, and predicts that these changes will ignite more competition in the crypto market. Rhonda also touches on the rising trend of prop trading and anticipates future regulations in this area to ensure legitimacy. Finally, she shares Mooz's commitment to digitization and connectivity, aiming to provide comprehensive solutions from investor protection to risk profiling.
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Tom Higgins | Gold-i
Tom Higgins | Gold-i
In this interview, Tom Higgins, CEO of Gold-i, discusses the convergence of crypto and FX liquidity. He explains the challenges of accessing crypto liquidity and how different execution methods, such as iceberg orders, help manage large transactions. Tom addresses the impact of AI in trading, emphasizing its use in sentiment analysis and trading pattern recognition. He also talks about the significance of Bitcoin ETFs in boosting institutional confidence in crypto markets. Lastly, Tom outlines the growth and future plans for Gold-i, focusing on enhancing their Matrix Net technology and expanding their role in crypto liquidity aggregation.
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In this interview, Tom Higgins, CEO of Gold-i, discusses the convergence of crypto and FX liquidity. He explains the challenges of accessing crypto liquidity and how different execution methods, such as iceberg orders, help manage large transactions. Tom addresses the impact of AI in trading, emphasizing its use in sentiment analysis and trading pattern recognition. He also talks about the significance of Bitcoin ETFs in boosting institutional confidence in crypto markets. Lastly, Tom outlines the growth and future plans for Gold-i, focusing on enhancing their Matrix Net technology and expanding their role in crypto liquidity aggregation.
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Throwback to FMLS:23 | FMvoices
Throwback to FMLS:23 | FMvoices
FMvoices are here to confirm all the great things you've heard about our events ✨ At the same time, it's a throwback to our very successful FMLS:23 and we want to give out a special thank you to everyone who took the time to talk to us during the busy hours of the expo!
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FMvoices are here to confirm all the great things you've heard about our events ✨ #fmevents #fmls24