Apple is playing a risky game in the loan market

Interesting times at Apple, as a crowd of fintech analysts gather to see how far Apple will go from the depths of the financial and banking pool. At the tech giant most recent announcement, they announced that loans initiated under the new Apple Pay Later BNPL product would be funded directly by Apple with the estimated $73 billion in cash they have on their balance sheet. Additionally, Apple announced that it will also make all credit decisions through the newly acquired Credit Kudos platform. BNPL loans will be initiated through the Goldman Sachs platform using the Mastercard Installments product, and while not directly stated, it is assumed that Goldman will continue to manage all operational and service aspects of Apple Card and ‘Apple Pay Later.

Interestingly, Apple isn’t starting this with its own products or in its own stores; Apple Pay Later will be available to all Apple Cardholders at all merchants where they currently use Apple Pay or their Apple Card. As a tech company with no experience in consumer lending, going long in this environment is like walking quickly through the shallow end of the pool and then ducking under the rope and floats to the spot where it begins to deepen. With BNPL lending volume skyrocketing to what many credit analysts predict are unsustainable levels, along with inflationary pressures and rising interest rates, it is one of the riskiest markets to launch. a new consumer loan product, especially for a company with no experience in the region.

This move to lending also has us wondering if Apple is really going to establish itself as a payfac to offer merchant services to iOS device uses, like Square (now a division of parent company Block) did when they launched their audio jack card player more than 10 years ago. years ago.

Preview by Don ApgarDirector of the Merchant Services Advisory Practice at Mercator Advisory Group

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