Apple scraps ‘buy now, pay later’ service in the US just months after rollout

Apple said it will offer a new instalment loans service through third-party credit and debit cards. Photo / Gilles Sabrie, The New York Times

Apple has scrapped Apple Pay Later, its “buy now, pay later” service that launched in the US only last year, marking a retreat in the iPhone maker’s ambitions to become a major provider of traditional financial services.

The tech giant said it is pivoting to a new instalment loans service offered through third-party credit and debit cards.

“With the introduction of this new global instalment loan offering, we will no longer offer Apple Pay Later in the US,” Apple said. Users with open loans through Apple Pay Later will continue to have access to features, but no new loans are being offered.

Apple announced its buy now, pay later (BNPL) offering in 2022 in what represented a major incursion into traditional banking services, with the tech company making short-term loans on its own rather than partnering with a bank.

It gave users the opportunity to pay for online goods and in-app services in four payments spread over six weeks, with the zero-interest loans offered through a wholly-owned subsidiary, Apple Financing. The move was seen as a challenge to BNPL incumbents such as Klarna and Affirm. Early access started in March 2023.

Goldman Sachs has been the company’s main banking partner since the launch of its Apple Card in 2019, and it facilitates Apple to access Mastercard’s network. But the tech group is in the process of winding down the partnership, which also underpins its savings account and credit card offerings.

Apple waded into BNPL at a time when US interest rates were low and consumers flocked into low-fee loans to fund their purchases.

However, the industry has come under pressure as interest rates have risen. The market value of Affirm, one of the largest BNPL providers, has fallen from a peak of about $45 billion (NZ$73b) in 2021 to about $9.5b today.

During its flagship annual developer event last week, Apple said its instalment loans feature will initially roll out in the UK with HSBC and Monzo banks. In the US it will be available for users of Citi and Synchrony, as well as lenders using software provider Fiserv.

US users “will also be able to apply for loans directly through Affirm when they check out with Apple Pay”, the company said at the time.

JPMorgan analyst Reginald Smith wrote in a note last week that the Affirm partnership would help Apple expand its offering to longer-term instalment loans, with the service expected to launch with the next update to the iPhone operating system in September.

“Affirm does not expect a meaningful impact on FY25 revenue... but it is hard to imagine adding a platform of this magnitude doesn’t move the needle” for it, Smith wrote.

Instalment loans will also be made available on Apple Pay in Australia with ANZ and Spain with CaixaBank.

Apple said: “Our focus continues to be on providing our users with access to easy, secure and private payment options with Apple Pay, and this solution will enable us to bring flexible payments to more users, in more places across the globe, in collaboration with Apple Pay-enabled banks and lenders.”

The news was first reported by 9to5Mac.

Written by: Michael Acton in San Francisco and Joshua Franklin in New York

© Financial Times