Apple’s Potential ‘Buy Now, Pay Later’ Plan Drops Industry Shares

  • Apple and Goldman Sachs consider BNPL service – Bloomberg News
  • Afterpay, Zip and Sezzle slip around 10% each
  • Apple’s entry challenges Australian players in US companies
  • Affirm drops to 14% in US trading

July 14 (Reuters) – A report that Apple Inc (AAPL.O) is working on a service that allows users to pay for purchases in installments caused shares in the “buy now, pay later” sector to fall, which has thrived during the pandemic as online shoppers seek easier reimbursement options.

The U.S. tech giant will use Goldman Sachs (GS.N), its Apple Card credit card partner since 2019, as the lender for the loans, Bloomberg News reported, citing people familiar with the matter.

The prospect of taking on a giant like Apple, along with other entrants including PayPal (PYPL.O), was likely to test Australian BNPL companies that have so far not been challenged on a fertile US market.

Shares of Australia-listed Afterpay, the country’s largest BNPL provider which derives much of its revenue from the United States, plunged nearly 10% on Wednesday.

Small rivals Zip Co Ltd (Z1P.AX) and Sezzle fell sharply. Nasdaq-listed Affirm Holdings Inc (AFRM.O) fell more than 14% on Tuesday following the Bloomberg report and closed 10.5% lower.

Apple Pay is a bigger threat than potential offerings from banks or credit companies given its broad reach and superior customer experience on a mobile or in-store website, a customer note from Citi analysts said.

The BNPL industry has exploded as online shopping accelerated during the global health crisis, with the number of merchants in the United States adding the refund option nearly tripling in 2020, according to a McKinsey report.

In Australia, where regulation of the fast-growing industry is light and adoption is higher than in other markets, a report from Deloitte indicates that 30% of consumers in the country have a BNPL account.

The rapid growth of the sector attracted Swedish company Klarna, which has become a major rival in Australia, and caught the attention of large American companies.

U.S. payments giant PayPal launched its service in Australia on Wednesday and upped the stake by saying it would remove late fees, an area that had grossed Afterpay nearly A $ 70 million ($ 52.23 million ) during fiscal year 2020. read more

The Bloomberg report said Apple Pay users would be allowed to split their payments into four installments without interest, or over multiple months with interest – a pattern similar to rivals Klarna, Afterpay, Zip’s Quadpay and Affirm.

A Goldman Sachs spokesperson declined to comment, while Apple was not available for comment.

Afterpay said competition reinforces the importance of the industry and each BNPL player operates a different model and generates revenue in different ways.

A spokesperson for Zip said Apple’s announced move validates the company’s operations where customer numbers are growing despite increased competition.

($ 1 = AU $ 1.3401)

Reporting by Nivedita Balu, Anushka Trivedi and Nikhil Kurian Nainan in Bengaluru and Byron Kaye in Sydney; Editing by Kim Coghill, Anshuman Daga and Arun Koyyur

Our Standards: Thomson Reuters Trust Principles.

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