Apple launches 'Pay Later' service with no interest or fee

Users can apply for loans ranging from $50 to $1,000 for in-app or online purchases

Tim Cook, chief executive of Apple, at developers conference where Apple first introduced the Pay Later service. Bloomberg

Apple has introduced a "Pay Later" programme in the US that will allow users to split their purchases into four payments over six weeks with no interest or fees.

First announced at Apple’s developers' conference in June last year, the service will allow users to apply for loans ranging from $50 to $1,000.

The loan amount can be used for online and in-app purchases made on iPhone and iPad with merchants who accept Apple Pay.

In the beginning, the company will invite randomly selected users in the US market to access a pre-release version of Apple Pay Later.

The company said it planned to offer the service to all eligible users in the coming months.

“There’s no one-size-fits-all approach when it comes to how people manage their finances,” said Jennifer Bailey, Apple’s vice president of Apple Pay and Apple Wallet.

“Many people are looking for flexible payment options, which is why we are excited to provide our users with Apple Pay Later."

The buy now, pay later business model, which allows consumers to make online purchases and spread out interest-free repayments, became more popular during the coronavirus pandemic.

Global BNPL transaction values stood at $120 billion in 2021 and are set to reach $576 billion by 2026, data analytics company GlobalData reported.

Users can track, manage, and repay their loans in Apple Wallet, where they can see the total amount due for all of their existing loans, and the total amount due in the next 30 days.

Users will be asked to link a debit card from Wallet as their loan repayment method. Credit cards will not be accepted, Apple said.

Purchases using Apple Pay Later will be authenticated using facial ID, touch ID or passcode.

Users’ transaction and loan history will never be shared or sold to third parties for marketing or advertising, the company said.

How Apple Pay Later will work?

Users can apply for a loan within their wallet, and this will not affect their credit record.

They will enter the amount they would like to borrow, and a soft credit check will be done during the application process to help ensure the user is in a good financial position before taking on the loan.

After the approval, users will see the Pay Later option when they select Apple Pay at checkout online and in apps on iPhone and iPad.

When it is set up, users can also apply for a loan directly in the checkout flow when making a purchase, Apple said.

How will Apple do credit assessment?

The service will be offered by Apple Financing, a new subsidiary of Apple that is responsible for credit assessment and lending.

It will report Apple Pay Later loans to the US credit bureaus later this year, so they are reflected in users’ overall financial profiles.

It will be the first time the company will handle financial services such as loans, risk management and credit assessments on its own.

Thus far, the company’s financial offerings have been supported by third-party credit processors and banks.

The Apple Card credit card is backed by Goldman Sachs for lending and credit assessment.