This is Warren Buffet's forte, allocating massive amounts of capital. Since Apple is his first/only tech company, I wonder if he's playing a part in this.
My guess - people think it is fooling unsophisticated customers into making poor financial choices and buying things they should know they can't afford.
But I'm with you, I don't see it as a big deal. I routinely take advantage of the 'no interest installment plan' for my Apple toy purchases on my Apple card. Why wouldn't I want to hold off on giving them my money for as long as possible, especially in an inflationary environment?
Responsible people have already a lot of easy choices for short term free money. Banks almost literally throw credit cards at people, with 45-60 days without any charge (and even with cashback) - assuming that you can afford it.
It’s free to end consumer, but these schemes make money by charging a percentage to merchants. And those merchants will compensate by bumping up their prices a little to cover the transaction costs.
In the best case, these are pointless services that only transfer money to the finance industry. In the worst case, they incentivize people to spend money on things they can’t afford (and also transfer money to the finance industry).
That is often the case, but not always: It can make perfect sense for a merchant to effectively pay the interest on your purchase, if it means the difference between making a sale now (and getting a bit less than list price) vs. sitting on inventory.
If it's not the merchant paying for the loan, the story is very different though.
> Apple Pay Later allows users to split purchases into four payments, spread over six weeks
So you basically have to start paying early, every 1.5 weeks. This seems worse than credit cards where you don't have to pay it up to like 60 days later.
It also seems strictly worse for users than other BNPL's like Affirm where many purchases can be paid over the coarse of several months or years.
Feels like Apple is more and more seduced/mesmerized by the opportunity to provide random consumer services that promise large revenues. Why add yet another new product to your portfolio when you're still struggling so much with software quality?
Yeah, the commenters here are missing a HUGE disruption in the BNPL market. Klarna was already ailing — I wonder if they can survive this punch. Interesting to see how BNPL industry will respond.
I'm not sure about that, grain of salt because I did no research to back this up but aren't apple users in general wealthier and therefore less likely to be the market for this sort of thing?
This business practice seems to have become popular lately. It really gives me a bad feeling, probably because the idea of getting your customers into debt (to your own company) in order to buy your products just seems wrong at a fundamental level. I don't want to live in a world where everything is either rented or paid for with a loan.
I can obviously understand why it makes sense from a strictly money point of view, but what is the business strategy against this? All I can think of is pushing a brand message that is explicitly anti-debt and builds its reputation on treating its community of customers well.
Most people are extremely irresponsible with their money, which means that they don't have much disposable cash. So you will lose sales if you can't offer financing to them. No individual will want to have more than 1 Iphone, so once you've sold to those who can afford it or have the discipline to save up for it, you'll have to find a way to sell to those who can't afford and don't have the discipline. Prepare for all consumer goods in America and Europe to be offered on Buy-Now-Pay-Later plans as standard within 3 years.
I feel like Apple has lost their way with the focus on services.
If they are going to focus on services, they should make them best in class. I expect best in class software, but Apple Music still doesn’t have anything like Spotify Connect and it is still incredibly slow and unreliable software (for what it is).
I don’t understand how tarnishing the premium brand with BNPL is worth it long term. And I especially don’t understand how all of their 0% interest offers will make sense in a world of 5+% interest rates.
They've been taking the shotgun approach for a while. Their product isn't any individual component, it's the platform as a whole. Why people want a company that sells:
- Phones
- Computers
- Tablets
- Headphones
- AR headsets
- Cars
- Watches
- Streaming boxes
- Speakers
- Email
- Video streaming subscriptions
- News aggregation
- Fitness routine subscriptions
- Music streaming subscriptions
- Video game subscriptions
- eBooks
- Apps
- Cloud storage
- Credit cards
- BPNL
is completely beyond me. Yes there's stuff in there they haven't announced. Yes there are a lot of accessories and services not listed.
I'm probably a Microsoft shill at this point, but I am a .NET dev running Windows and I have a Microsoft 365 family subscription and bought an Xbox. All of my hardware is from other manufacturers. My finances are not tied to MS. I can't think of another company that has gotten the amount of blind trust that Apple has.
Is there some sort of insurmountable tech debt over at Apple that requires these slow rollouts and long development cycles? They announced Pay later at WWDC 2022, and it's just now releasing, and the Savings account was announced in October and would be available "in the coming months", but is only just now (likely) coming out - and given Pay Later is still limited release, I imagine the savings account feature will be as well.
Yuck my two cents. Apples jump into financial services and pay as you go services model has really rubbed me the wrong way. If i get another settings alert that I need to setup apple wallet, sign into icloud or now perhaps a notice that I can “pay later” …… geez I already purchased you laptop … leave me alone and just work.
I've never used a BNPL service, partly because I didn't know if it would complicate the process of returns. Does anyone know if there are complications, for example, if you buy two items and return one of them? Does the merchant give you cash that you then end up using to pay off the full BNPL amount? Or does the refund get routed the other way, to the BNPL service, and then eventually to you?
For users of a reward card, this alternative probably isn't that useful. I'd miss out on 2% cash back, and the zero-interest period is only 6 weeks, which is just a couple weeks longer than the zero-interest period on a credit card (which bills you once a month, effectively giving you 0-4 weeks of zero-interest). I can see how it could be good for younger folks who need to build up credit and can use this to do so responsibly.
My favorite part of all these "buy now pay later" services is going to buy some charging cables, a few bags of flour, or other small random stuff and being offered to split a $19 purchase into 4 equal payments.
People should worry about having small short term loans on their credit report, because it could result in other lenders assessing them as a higher risk and therefore a higher interest rate.
For example, you use Apple BNPL, and then in a couple years you go to buy a house, and they see that you use a BNPL service, and so their underwriting classes you as a higher risk and you could end up paying 100bps more on a mortgage.
But the wording on Apple's website is fine since the whole claim is technically true:
>Users can apply for a loan within Wallet with no impact to their credit.
Yeah I get what you are saying. I bought a cup of coffee from Starbucks and they told me it was hot but they didn't tell me the caffeine could make me restless and dehydrated. Are they bad? Should I sue them?
What's the value proposition of a zero interest/no fee buy now pay later scheme? Is it just reaming folks who miss a payment? A loss leader getting more users into the Wallet ecosystem?
It seems like many of them act like credit cards and charge the merchant a percentage, since they “drive consumption” and encourage people to buy stuff. Of course, this fee will likely be added into the price that all consumers pay, so as these get bigger, we all will be subsidizing interest free loans to people in the form of 1%-3% higher prices. Much like credit cards are today.
My SO recently bought an electric bike using this sort of scheme, not from Apple obviously, but the monthly payments toward the 3500$ bike were less than what it cost to commute to work using public transport before that. So it turned from an being a non trivial investment to an obvious thing to do.
The value proposition to me seems to be that they sold a bike at 3500$ they would not have sold otherwise and they can deal with the payment being made over time rather than all at purchase time.
For the user the value proposition is that value adding purchases like this can be made and paid off while they provide value.
That situation is close to the textbook example for when a debt hawk like Dave Ramsey would tell you it was okay to use a credit card. When you are actually using it to facilitate an investment in your future, not just buying toys. The additional zero-interest aspect is icing on the cake.
> When you are actually using it to facilitate an investment in your future
I might have expressed this poorly, but it wasn’t an “investment in the future”. And that’s exactly what made it interesting. The monthly costs where lower immediately, since the cost of transport which was saved was higher than the monthly cost to pay for the bike.
It was just a straight up cost reduction due to the structure of the payment. Had the zero interest monthly payments not been available then it would have been the more typical “investment/ROI over time” situation, and there might be an argument for it still being beneficiary to go into debt to make the purchase because over the long run it would pay of again. But the payment structure just makes everything a thousand times simpler.
It makes products more “affordable” (emphasis on the quotes) by spreading the payment for them over multiple salary cycles. That TV you didn’t buy because you couldn’t afford it? You told yourself you don’t need it, but now that you can mechanically pay for it, you “need” it so you’ll buy it.
It also allows the sellers to increase their prices or even simply upsell without pricing out their own consumer base.
> This is clearly targeted to people with good credit.
The commercials for Apple Pay have me thinking the exact opposite.
* People with good credit don't need to manage their monthly credit payment. They simply pay it all off.
* People with good credit also don't really need to apply for an emergency credit card (unless they happen to forget their wallet).
My impression is many of these products are akin to loan sharks. They loose/break even on "good" borrowers, but make loads on people who are "so close" to being able to fully repay.
Capitalist cannibalisation a level-up from Amazon's pets and cattle categorisation on the fair-game userbase? Accounting minded players game the system to their benefit maximising purchasing power on credit over a timespan.
> Users will be asked to link a debit card from Wallet as their loan repayment method; to help prevent users from taking on more debt to pay back loans, credit cards will not be accepted.
So in addition to the soft pull requirement, it's clear this is almost exclusively targeted at people with good finances.
Not being able to use a credit card is a huger bummer though. Buying something like a macbook pro is a decent way to meet the minimum on a credit card with a signup bonus if you're not a high rolling spender normally.
I haven't traditionally made use of services like this, but am I correct in that one might be able to make small gains with them, much as is possible with credit cards?
For example if there's a large purchase one needed to make and had the cash on hand for, wouldn't it be smarter to let most of that cash accrue some interest in one of the many 4%+ interest savings accounts now available while making payments on the 0% interest BNPL?
In theory yes, but this is way less beneficial than just using a credit card.
The average maturity date on Apple (and others) BNPL is 3 weeks. Credit cards have a minimum payment deadline of 3 weeks from the statement without accruing interest, and on average you'll get another 2 weeks on top of that depending on when in the cycle you made the purchase. So you're getting at least the same average time to accrue interest, plus you're getting credit card rewards of 1-5%.
I can't find information on how Apple will specifically implement it, but Sweetwater has a similar thing (they're a music gear shop) and it's auto-billed. You're essentially signing up for a 3 or 6 month subscription service where the monthly bill is 1/3 or 1/6 of the total cost of goods.
I don't understand what an advantage there is if you finance a purchase but have to pay off the installments every 2 weeks.
I doubt that there are so many people getting paid bi-monthly.
I’ve used the existing payment thing to buy a MacBook Pro on my Apple Card back in 2021. I mean at 0% interest seems like it’s all in your favor if you’re not spending like a dumbass.
Good question! I don't see anything about it, other than that it'll damage your credit history.
To me this seems like a recipe for trouble, I'll stay away from it.
There's also a part of my brain that jumps to: "if you missed a payment, would they just lock you out of your laptop by some remote command?", though there is no indication of this, and it seems unlikely (as of now).
Same thing that happens when you refuse to pay your credit card bill, I assume. Annoying bill collectors, maybe a court judgement, and for sure a dramatic cut in your credit score.
I still don't understand this obsession everyone else has with finding reasons to criticize Americans. Especially when it's frequently based on ignorance.
The other reply to your comment is pretty instructive. There appears to be a positive correlation between how wealthy a country is and how high the household debt load is.
A dollar today is worth more than a dollar tomorrow. Pair that with American Optimism and trusting the Fed, debt just makes sense. It's basically temporal arbitrage.
I mean I had an Apple Loan for students way back in 2000 with an APR % that would have made me pay $8,000 for a 400mhz G4 had I followed their payment schedule...
I saw one of these while checking out on Uber Eats recently.
#1, no, I don't want to spread my $50 worth of sushi out over 4 months
#2, if you do need to do that, maybe you shouldn't be ordering from Uber eats?
It seems extremely parasitical. I'm equally bothered that these companies are doing this and that some consumers feel the need to do this (and think this is a good idea)...
When I bought my Centris 650 in college, I bought it using a loan that was initially set up by Apple.
I don't see anything surprising or new about this other than that Apple has an easier way of managing that loan than a book of paper that you ripped one out each month and sent it in along with a paper check.
iPhones have been financed and or given 0% loans by nearly every carrier and they have $51 billion dollars cash on hand. Providing their own loans makes sense regardless.
