What's the business model for all these BNPL companies if they have zero fees and zero APR?
Are they counting on some % of users requiring extensions?
Are they getting a % of transaction value as fees?
Yes, this. And it's worth it for the merchant because they make more sales. patio11 has a good article about it: https://www.bitsaboutmoney.com/archive/buy-now-pay-later/
Amazon does the same - you can buy a thing with 0% APR in 6 monthly payments, but you lose your Amazon card 5% cash back.
>BNPLs pitch themselves to businesses as more marketing efforts and less simple payments rails. They’re more expensive than cards by about 300 bps.
I assume this is all the same as Goldman Sachs’ Apple credit card. The same payment fees from merchant to Goldman Sachs, and then Apple might get a little too. Since Goldman is taking all the underwriting risk, I would be surprised if Apple is getting the lions’ share.
Apple’s reward is their devices becoming more popular among people who cannot get credit cards and might find utility in Apple BNPL.
So in return for a high rate (merchant fee for AfterPay here in Australia is 4+%) the merchant gets guaranteed payment and no chargeback risk. The BNPL service makes money on the merchant fees and on the fact that this lending appeals to young people and those with low credit scores.
It's an extension of what used to be called "lay-by" here, but in that case, the merchant wouldn't release the item until it was paid in full.
It's not a lot of credit since you have to pay it back pretty quick, but it does have a similar benefit to paying with a credit card and then paying the monthly statement.
I assume the merchant fees are the same either way.
That would reduce the appeal a little. And that's different than their own-store policy on their card -- if you buy from Apple with an Apple Card on the installment plan, you get the 0% for 12 months or whatever, and you get the 3% cash back too.
Thanks for the 2% comment, by the way. Made me go look, since I only recall it being 1% (for most things). Turns out it's 2% whenever I use my Apple Watch to do the transaction. Works for me!