Apple launches Apple Pay Later, a fractional payment solution

On Monday, Apple announced the launch of Apple Pay Later, a fractional payment service that will enable Apple Pay users to pay for purchases in 4 installments over a total period of 6 weeks. Apple is thus preparing to compete with players such as Klarna and Affirm, which are starting to experience difficulties.

Apple Pay Later: monthly instalments spread over 6 weeks

Apple has decided to conquer the fractional payment market, or Buy Now Pay Later. At its annual developer conference, WWDC 2022, the Cupertino-based company announced the launch of Apple Pay Later, its split-payment solution.

Available initially in the United States during 2022, Apple Pay Later will enable consumers paying for purchases via Apple Pay, whether made online or in-store, to spread payments over 4 monthly installments, over a maximum period of 6 weeks.

Consumers will be charged every two weeks and will be able to manage their payments from their Apple Wallet. The interest rate is zero, and there are no additional fees. Apple does not charge late payment fees either.

The first turbulence for fractional payment players

Apple, which has chosen the Mastercard network for its fractional payment service, has not indicated the name of the bank chosen to take responsibility for the credits. However, it is likely to be Goldman Sachs, with which Apple has already launched its Apple Card credit card, which is once again collaborating with the Californian firm for its fractional payment solution.

This new service enables Apple to continue diversifying its services, a diversification that lies at the heart of its strategy. The company is attracting new users and encouraging existing users of iPhones, iPods and other Apple devices to move into its ecosystem, whether for communications, entertainment or purchases.

The fractional payments market, hitherto largely dominated by fintechs, has recently experienced its first turbulence after a considerable boom.

Several factors have contributed to weakening major players such as Klarna and Affirm, starting with rising interest rates and inflation, as well as the slowdown in the e-commerce market, which grew considerably during the Covid-19 pandemic.

Affirm has seen its share price plummet by 75% since the beginning of 2022, and lost a further 5% on the announcement of Apple Pay Later. Klarna, meanwhile, is struggling to convince investors for its next fund-raising round, and risks seeing its valuation plunge by 30-50%.

These difficulties could help Apple carve out a comfortable position for itself in the BNPL sector, even if the growing vigilance of regulators against over-indebtedness may put the brakes on its progress.