AMSTERDAM – Apples moving into the crowded “buy now, pay later” space has raised the stakes for the fintech companies that have pioneered the trend.
The iPhone manufacturer plans announced to launch its “pay later” loans on Monday, expanding a range of financial services products that already include mobile payments and credit cards. Called Apple Pay Later, the service will allow users to pay for things on four equal installs, paid monthly without interest.
This puts BNPL players like PayPal, to assert and Klarna in an awkward place. The fear is that Apple, a $ 2 trillion company and the world’s second largest smartphone maker, may divert customers from such services. Shares of Affirm are down 17% so far this week on the news.
The BNPL market had already shown signs of difficulty. Last month, Klarna 10% fired of its global workforce, blaming the war in Ukraine and fears of a recession.
A triple whammy of rising inflation, higher interest rates Other slow economic growth they questioned the future of the industry. The increase in financial charges has already made debt more expensive for some BNPL companies.
“They will get in trouble because credit always has to relax and be paid off,” Charles McManus, CEO of British fintech firm ClearBank, told CNBC at the Money 20/20 Europe fintech conference in Amsterdam.
“When interest rates start going up and inflation starts going up, all the chickens will go home to the roost.”
McManus said the industry is pushing people into debt that they can’t afford to repay and should therefore be regulated. The UK is trying to push through BNPL regulation, while US regulators have opened an investigation into the sector.
“Do I pay the gas bill or do I pay for the seat I bought three years ago with a zero-interest credit that is due?” McManus said, warning that “excesses always come back”.
Apple said it will handle loans and credit checks for Apple Pay Later through an internal branch, eliminating Goldman Sachs, who previously worked with the company on the credit card. The move is a significant step that will give Apple a much bigger role in financial services than it currently does.
Sebastian Siemiatkowski, CEO of Klarna, said the launch of Apple Pay Later marked a “big win for consumers around the world”.
“Plagiarism is also the highest form of flattery,” he tweeted earlier this week.
Ken Serdons, chief commercial officer of Dutch payments start-up Mollie, said Apple’s BNPL feature “raises the bar” for fintechs operating in the market. Mollie offers installment loans through a partnership with another fintech company in3.
“The BNPL space is filling up with many new players who are still entering the market,” he said.
“It will be difficult for players with a poor proposition to compete effectively against the best players out there.”
However, James Allum, senior vice president for Europe at payments firm Payoneer, said there is enough room in the market to compete between different companies.
“Businesses should look for collaboration opportunities rather than competition and threats,” he said.