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Apple's American version of the iPhone: grossly underrated

via:财联社     time:2023/3/29 22:01:04     readed:135

Apple on Tuesday launched its long-anticipated Buy Now Pay Later (BNPL) service in the US, where it is poised to crack the BNPL industry.

Apple said the service, called Apple Pay Later, would allow users to split payments into four installments over six weeks, with no fees or interest for customers. Select users will try out the service before it is rolled out nationwide.

This payment mode seems to be somewhat similar to the familiar credit card and debit card. It is also buy first, enjoy first. However, BNPL providers including Apple can offer a zero-interest and zero-fee payment combination, which seems to be more advanced than credit card and debit card.

There is also considerable confusion as to how BNPL businesses can survive by providing financing but not making money from consumers.

Take a cut from the retailer

Traditional consumer loans, whether credit cards or credit cards, are based on a profit model that charges customers fees and interest.

For consumer loans like Huabei, although there is a grace period of up to one month, the lender still needs to repay the whole amount before the fixed time of the next month, or choose installment payment, but pay certain commission charges and interest. Credit cards are more stringent in terms of approval, but the basic logic is still similar to that of the flower payment.

However, the underlying logic of BNPL is clearly different from credit cards and credit cards. It does not rely on lenders to make money, but on the merchants of the goods that lenders buy, known as BNPL providers, who make money by charging fees to retailers.

A key reason why a retailer can accept a BNPL provider's cut or commission is that through installments, consumers either consciously or unconsciously increase their consumption. Retailers can use this to raise prices or offer promotions that include more items and boost results.

On the other hand, the main advantage of BNPL over credit cards is that it charges no interest and is easier to get approved. And because BNPL is not yet officially listed as a scoring standard by credit bureaus in the United States, many see the service as a lower-threshold alternative to credit cards.

The appeal of the large number of ordinary consumers willing to see BNPL as a new financing option is a natural factor for retailers to consider.

Leverage consumer lending

Its easy-approval model has also made BNPL a quick upstart in the payments industry.

According to Provenir, a fintech service company, the BNPL market is expected to reach $155 billion in 2023 and $744 billion in 2027. He also believes that consumers and businesses will increasingly turn to BNPL, and that the industry will change the way our generation thinks about financing purchases.

Naturally, there are some problems with this. A spokesperson for Swedish BNPL giant Klarna previously explained that the company performs soft credit checks on its users, referring to a customer's credit report and making its own assessment of the customer's credit risk. But the customer's use of BNPL does not affect the customer's own credit score.

Borrowers with weak financial conditions were given easy access to loans because of lax credit checks, allowing the BNPL to pile the risk on itself. Although some of the delinquent payments can be recovered through late fees, if a large number of bad debts emerge, it will be a serious crisis for BNPL providers.

But the risks are manageable, according to the big players in the industry. Klarna points out that it offers credit with clear repayment plans and affordability checks. Clearpay says customers' initial spending limits are low, and if a single payment defaults, it suspends the account to limit the damage.

In addition, the BNPL provider also stated that it is actively participating in customer credit reviews and continuously monitoring credit and affordability.

The Apple threat

Unlike companies that have been working on the BNPL for years, Apple's version of the BNPL coming to the U.S. market is more of a harvest.

More than 85 percent of U.S. retailers accept Apple Pay, according to Apple. This means that Apple's BNPL starts off with a "rich kid" aura, a direct departure from the "poor kids" who started with nothing.

Danni Hewson, head of financial analysis at AJ Bell in the United Kingdom, said Apple Pay Later will absolutely beat the rest of the market because Apple is such a ubiquitous brand that it will erode the market share of other players.

On Tuesday, when Apple announced its BNPL service, BNPL rival Affirm fell 7.34 per cent, while Paypal, which is involved in the BNPL business, edged down 0.82 per cent.

However, that doesn't mean Apple can rest easy. Beyond the industry itself, the current environment in the United States is not ideal for credit.

Today, with the United States still Mired in high inflation, consumers are inevitably holding on to their wallets, and even BNPL's sweet flavor won't stop Americans from worrying about their wallets. Coupled with the shadow of the banking crisis, most consumers have become more cautious about spending money.

D.A.Davidson analyst Christopher Brendler said Apple will play it safe in this macro environment and is likely to underwrite and collect loans itself rather than seek a partner.


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