Apple previously revealed the launch of Apple Pay Later, a new tool that functions like a “buy now, pay later” arrangement. Users may utilize the tool for free to evenly distribute their Apple Pay transactions.
Apple’s foray into the purchase now, pay later market dispels predictions of a cooling-off phase for the sector. As the cost of products grows and family budgets tighten, more borrowers will be able to take advantage of the buy now and pay later plan thanks to Apple Pay. Plans that let you borrow money now and pay it back later may be a cost-effective option, but prospective users should think about the dangers involved.
What is The Operation of Apple’s Pay Later Service?
Although the service seems straightforward to use at first glance, Apple has a well-thought-out strategy behind it. Apple has established a separate entity, Apple Financing LLC, to finance Apple Pay Later. This new firm is independent of Apple’s main operations and has received the required approvals from the US Treasury Department to provide such a service.
To determine a customer’s creditworthiness, Apple Financing LLC will do a soft check credit check on them. This will include obtaining their credit report as well as other information, such as their history of purchases and payments with Apple in both Apple shops and online services. This data will be used by the Apple subsidiary to provide short-term loans to Apple Pay Later users.
The company’s internal risk assessment engine, which was provided by a UK-based startup called Credit Kudos Ltd that Apple purchased earlier this year, would conduct this creditworthiness check of a customer for the issuance of smaller loans. You should not confuse Apple’s BNPL with the $300 payday loan online because they are different types of loans. In the first case, you are not charged interest, but you cannot get cash, as with a personal loan.
Additionally, to provide this service, Apple teamed up with Mastercard, a company that works with retailers to let customers purchase goods over time. In addition, Goldman Sachs is participating in the transaction as the technical loan issuer. When it comes to making the loan, Apple isn’t going to depend on the bank’s financial statements or credit choices.
What to Realize Before Using a Buy Now, Pay Later Arrangement
When it comes to buy now, pay later arrangements, most financial experts advise caution. Though it may be simple to stretch out purchases over time without incurring any extra costs, taking on debt may be dangerous, especially for products you don’t need.
Overspending is one of the main issues with purchase now, pay later arrangements. These programs’ emphasis on rapid satisfaction might cause you to overspend and later regret it.
When paying with cash, you are far more aware of whether what you are purchasing is worthwhile. However, our value radar is thrown if we don’t instantly feel the agony of payment. You’re prepared to spend extra money on something or perhaps make a purchase you ordinarily wouldn’t make.
Additionally, it’s simple to forget about payments and become behind, particularly if you’re juggling many buy now, pay later debts at once. If you overdraw the debit card associated with your Apple Pay Later, your bank or credit union will probably charge you a fee even if Apple may not. Additionally, some buy-now, pay-later lenders could notify credit bureaus about late payments, which might lower your credit score.
Concerns regarding the absence of regulation about buy-now, pay-later arrangements are also developing. The Customer Financial Protection Bureau launched an investigation against some of the biggest providers in December 2021 due to concerns about data collection, debt buildup, and consumer protection. The agency hasn’t yet made its results public, however.
Choosing to buy now and pay later isn’t necessarily a terrible idea if you want more payment flexibility and you have the money for the payments. However, suggest pausing before approving the loan.
Consider delaying the purchase for a night if you want to benefit from 0% interest and stretch out the payments. If you can afford the payments and you still genuinely want it tomorrow, go ahead.
What You Need to Know
Apple Pay Later will be available at Apple Pay and Apple Wallet checkouts. However, point-of-sale transactions will not be supported by the service; only online and in-app sales will be permitted.
According to Insider Intelligence, the usage of BNPL services increased by 102.3 % over the previous year as a result of the coronavirus pandemic’s first surge in popularity. It is foreseen that in 2023, this growth rate would reduce to 11.7%.
The announcement comes at a time when the BNPL industry is unclear. Regulators are also concerned that certain BNPL players may be breaking consumer protection regulations and making it harder for customers to make ends meet.
Apple enters the market with a leg up on the competition. With Apple Pay Later, consumers may authorize and manage payments on their Apple device without a third-party service.
Apple makes a significant advancement in achieving its goals for consumer financial services with Apple Pay Later. This will put more pressure on BNPL fintechs, which already have to deal with regulations, competition, and investors pulling in the opposite direction. One of the newer features of the new Tap to Pay on iPhone is Apple Pay Later, which joins the recently introduced Tap to Pay on iPhone, which allows shops to take payments on iPhones without the need for extra hardware.
You should also be aware that The credit limit for Apple’s Pay Later service is anticipated to be $1,000 or $77,775.
If you forget to make a payment, Apple won’t give consumers who utilize the Apple Pay Later service credit again.
As you can see, Apple is expanding and trying to keep up with current trends. According to the description, Apple Pay Later can become the main competitor in the market. Conditions are available for use. But at the same time, you must remember that this is in any case a type of loan. Therefore, you need to weigh the pros and cons before buying.