Apple Pay Later Threatens an Already Crowded BNPL Market

Pretty big news this week in the ever-more-frothy buy now, pay later space. Apple, which has long been a major fintech player via ApplePay, will reportedly launch its own BNPL solution in partnership with Goldman Sachs called Apple Pay Later.

BNPL is a space where eCommerce and fintech intersect. A growing number of platforms have cropped up over the past decade or so to provide an elegantly simple alternative to revolving credit to online (and increasingly offline) shoppers. And the pandemic led to a surge in BNPL, which rode the wave of explosive eCommerce growth.

Many major brands offer BNPL as a way to convert more sales and reduce the number of carts abandoned at checkout. Small, independent retailers are also increasingly turning to BNPL. Both online and brick and mortar. And we are beginning to see a wider set of use cases for BNPL, including travel and car repairs. And increasingly, for B2B transactions.

You may recall that Goldman Sachs also backs the Apple credit card, which is not linked to the new BNPL solution. The solution will work through Apple Pay, with two choices “Apple Pay in 4” and “Apple Monthly Installments.”

Will Retailers Embrace Buy Now, Pay Later?

How Big a Deal is Apple Pay Later?

The news on Wednesday had an immediate and negative impact on global stocks tied to BNPL, including PayPal, Affirm, Afterpay. and others. Each of these stocks dipped on the news Tuesday. Afterpay, for example, was trading at 87.79 as of 2 pm ET on Tuesday. At this writing, it was hovering at 76.96. That’s about a 12% dip. Similarly, Affirm dropped 21% over the same span.

Apple is a formidable market entrant. And the news clearly rattled investors in Apple’s new field of competitors. However, Apple Pay Later isn’t likely to clear the field. At least not easily. There are too many established and well-capitalized players like Klarna ($46 billion valuation), Affirm ($14.8 billion market cap), Afterpay ($30.9 billion market cap), and others that will not be easily swept aside.

BNPL is also a young market with considerable upside. Plus it has demographics in its favor. One of the driving forces behind BNPL is the notion that GenZ and younger Millennial consumers are reluctant to take on the consumer debt that made their parents’ lives miserable. Afterpay Nick Molnar refers to this as the “debit economy.”

Will Burgeoning BNPL Make Its Way Down to Local and IRL Shopping?

Globally there are strong regional players. But many operate in markets where Android is the dominant smartphone platform. This is why one BNPL executive in the Middle East, a heavily Android-dominated region, reacted with the email equivalent of a shrug to this announcement.

Still, Apple Pay has a formidable reach, particularly in the U.S., where we expect Apple and Goldman will focus most of their initial efforts with Apple Pay Later. According to Statista, ApplePay has 383 million worldwide users. In the U.S., ApplePay is the most commonly accepted mobile payment solution. And 35% of online retailers worldwide accept ApplePay.

Apple has a lot of incentive to roll out a BNPL solution. Of course, it could generate billions in transaction fees. It could also use BNPL as a wedge to increase iOS share in markets where it lags. This is why my contact in the Middle East just might want to reconsider that shrug.

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