Apple ends ‘buy now, pay later’ scheme in the US

Apple is terminating its in-house buy now, pay later scheme in the US, which it launched just last year.

Apple, the technology giant, has announced a significant shift in its approach to offering financial services. The company will now provide customers with payment plans through third-party credit and debit card lenders, marking a departure from its initial strategy of directly offering loans to consumers.

Transition to Third-Party Lenders

Previously, Apple had ventured into financial services with its Apple Pay Later scheme, allowing users in the US to break up the cost of purchases up to $1,000 (£788) into four installments over six weeks without interest or fees.

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This initiative, managed by Apple Financing, a new subsidiary of Apple, represented a bold move into the financial sector, bypassing traditional banks and lenders.

Shift in Financial Strategy

The decision to partner with third-party lenders such as Citi in the US, HSBC in the UK, and ANZ in Australia marks a retreat from Apple’s earlier plans to provide traditional financial services. This strategic pivot comes amid rising interest rates, which have made direct lending less attractive.

The shift will allow Apple to leverage the expertise and infrastructure of established financial institutions while continuing to offer flexible payment options to its customers.

Integration with Wallet App

Existing borrowers will still be able to manage their payments using Apple’s Wallet app, ensuring a seamless transition to the new system.

The partnership with major banks will enable Apple to offer installment payment options through its upcoming iOS 18 operating system, expected to be released later this year.

Impact of Rising Interest Rates

Apple’s move to collaborate with banks comes at a time when central banks worldwide have been raising interest rates to combat inflation. This economic environment has made direct lending less appealing, prompting Apple to adapt its strategy.

By partnering with established financial institutions, Apple can continue to offer competitive and convenient payment plans without bearing the risks associated with direct lending.

Future Outlook

The integration of installment payment options into iOS 18 signifies Apple’s ongoing commitment to providing innovative financial solutions to its users.

By aligning with reputable financial partners, Apple aims to enhance the user experience while navigating the complexities of the current economic landscape.

This strategic shift not only ensures the sustainability of Apple’s financial services but also underscores the company’s agility in adapting to changing market conditions.