Apple Discontinuing Apple Pay Later
9to5mac.com
9to5mac.com
Apple Pay Cash seems like it makes sense (at least in the US; it never launched here in the UK, but there would be very little point in it anyway), but this and the Apple Card always seemed a little bit gross. Especially because I would presume most of the money is made from people who are less well off.
Those customers are called Deadbeats[1]. All credit card customers should strive to be Deadbeats.
* Amex had 67b in interest + non-interest revenue, of which the single biggest driver was discount revenue (aka interchange) at 33b. Interest contributed 20b, card membership fees contributed 7b, and services fees and other were ~7b combined. Amex's target base is wealthier individuals.
* Discover had 14.4b in credit card interest revenue and 1.4b in net discount and interchange revenue (meaning after paying rewards). Discover caters mostly to what the financial industry would euphemistically call "subprime" creditors.
On top tier cards, interest and late fees are not the intended way to make money on the majority of cardholders (although of course banks will still charge them for customers that do carry a balance). On lower tier cards, you'll often see less rewards points or even annual fees without any corresponding benefits (i.e. no lounge access, no rental car insurance etc).
For example, American Express has traditionally focused on higher-income cardholders, and their top tier cards are charge cards, which are always due in full at the end of each statement period (i.e. carrying a balance is not an option). They don't even list an APR, as far as I remember (although they've recently started offering an option to carry certain purchases, making that story a bit less clear).
I presume that the type of person who wants an apple card is strongly negatively correlated with the kind of person from whom they could make lots of money via fees from. I would bet my apple card balance that the percentage of apple card customers who religiously pay off their balance every month is much much higher than industry average.
GS did have some other cards before Apple Card, but they were not generally marketed or widely available to the masses like Apple Card. GS wasn’t well prepared for the extra overhead and customer support, and Apple negotiated a _lot_ of power that GS agreed to give them in areas like underwriting decisions. Apple wanted applications approved and many approvals wouldn’t have met with GS’s typical risk tolerance.
- GM created GMAC Financial to help consumers buy GM automobiles, 100-years ago.
- Apple created Apple Financing LLC, to help consumer purchase expensive phones & laptops.
Apple Pay Later might be the only thing Apple underwrote, as far as I can tell.
Obviously they might have been borrowing the capital from or outsourcing the risk of the former to a third party, or participating in the lending of the latter via some revenue sharing agreement; I have no idea about their particular deal for the Apple Card.
Quite often, I'm not even receiving goods or services at the time my payment method is charged, so in the end it would be me giving the merchant an interest-free loan!
Letting customers try out the merchandise, potentially swap for a different size of clothes etc. can be a win-win.
BNPLs are decidedly not that, though – see here for some back-of-napkin math: https://news.ycombinator.com/item?id=40711149
My guess to answer the question at the bottom of your comment you linked. Its a mix. For some, its a lack of financial literacy. For others, its not being bothered with other options and taking the first option thrown in their face (even unaware that better option exists).
Which in Apple's case, seems like a perfect way to push their credit card, and can use that to push it harder. Why even bother with BNLP when there is a better option. I also imagine Apple benefits more from the credit card than they do their partnerships with Affirm. But that would just purely be a guess.
You even get the full cashback amount after making just the down payment, which I found quite nice.
I’m not even sure if you can use Apple Pay Later for most Apple hardware, since the maximum loan amount seems to be $1000.
I know it seems like an absurd business proposition, but apparently they're able to make it work.
I considered it a few times, but like, it only spaced the payments out over 6 weeks and I had to unfreeze my credit report so...it wasn't a big win.
It's unsecured, just like a credit card.
>Cc has interest rates and credit scores.
AFAIK BNPL products either change interest directly to the consumer or is subsidized by the merchant. There's also a credit check prior to it being granted, so it's not like they're handing it out to just anyone.
One reason to not do chargeback unless absolutely sure that it is valid.
Chargebacks are either paid for by the acquiring merchant or the issuer; in both cases (if accepted by the issuer), they extinguish the cardholder's debt to the issuer.
[1] https://www.afr.com/companies/financial-services/apple-to-dr...
If that were the case I can see this being like the third party BNPL schemes such as Klarna sure. Otherwise it’s just semantics of where the option lives.
In other words, it's just a completely different model from retroactive, cardholder-paid flexible payment options for credit/charge card holders.
Why would the interest rate be different from someone making 2,000 a month trying to buy 1,200 $1 widgets?
There's all sorts of manufacturers that offer 0% financing. Presumably:
* A small cost in financing can dramatically increase their deal flow which makes the whole thing worth it.
* A lot of these deals have pretty punishing terms where if the customer can't pay on time, they get hit with all of the interest anyhow. Not sure if that's true of Apple's deal in particular.
Apple Pay Later did not include fees or interest for the establishment of the loan or for late payments. This made the offer unique in this space. https://support.apple.com/en-us/108419
However the compromise for such terms was a minimum purchase threshold of $50 and a maximum purchase limit of $1000 per sale, the requirement of a linked debit account (i.e. not a credit card), and Apple's ability to deny further Apple Pay Later purchases. Whereby the app simply didn't present the option.
For the merchants of high ticket items, it makes their product's more accessible to people with low-savings. So the merchant offers 0% rates.
Credit card payments have an average payment due date of 6 weeks (0-4 weeks until statement cutoff, 4 further weeks until payment due date without interest charges), no interest charges when paid within that timeframe, and offer around 1-2% of cashback.
BNPLs have 25% due at 0, 2, 4, and 6 weeks respectively, for an average due date of 3 weeks, and usually don't offer any cashback. In other words, you get half as long to pay back the loan and miss out on 1-2% of opportunity cost on top of that.
The fact that people still use them shows that either some consumers value other things more highly than just the strictly best deal from a financial point of view, or is a concerning piece of evidence of a lack of financial literacy (or both).