Apple's buy now pay later offering launches with built-in advantages

In June 2022, Apple shook up the digital payment market with news that it would enter the Buy Now Pay Later space.

It came at a time when BNPL’s trajectory seemed to be moderating, as the return to in-person experiences and tightening economy were pulling back pandemic-era gains across ecommerce.

Still, Apple’s announced entrance was a big deal. With a BNPL option that was pre-loaded into Apple Wallet coming to iPhones everywhere, it was easy to see a path for Apple to become a new leader in the market overnight.

But as months went on, the service didn’t launch. In September, word came down from Bloomberg Apple sleuth Mark Gurman that the product was facing “significant technical and engineering challenges.” Speculation about the service stretched on, but there was no further official word from Cupertino.

On Tuesday, the talk will be put to rest. Apple Pay Later formally launched with an announcement that the company will begin inviting select users to test a prerelease version. A wider launch will follow in the coming months.

This launch comes with more details about what Apple's Buy Now Pay Later service will look like. For users, here's how it works: Apple said loans can range from $50-1,000. Payments can be made in four installments over six weeks.

As expected, Apple Pay Later is built directly into Apple Wallet, so tracking, management and repayment stays in one place. Users can also view a total amount of existing loans, and view repayment on a calendar. Notifications will also be provided before a payment is due.

“There’s no one-size-fits-all approach when it comes to how people manage their finances. Many people are looking for flexible payment options, which is why we’re excited to provide our users with Apple Pay Later,” said Jennifer Bailey, Apple’s vice president of Apple Pay and Apple Wallet, in a statement. “Apple Pay Later was designed with our users’ financial health in mind, so it has no fees and no interest, and can be used and managed within Wallet, making it easier for consumers to make informed and responsible borrowing decisions.”

Apple Pay Later enters a crowded market for BNPL, where Klarna, PayPal, Afterpay, Affirm and Sezzle all have a sizable presence, and are already battling for share. Many of those services have been around for a decade, and saw significant growth spurts in 2020 and 2021 as more shopping migrated online. Yet Apple has some advantages. Along with being a name brand, it has fewer barriers to adoption.

The product’s presence in a widely-used digital payment app on a massively popular smartphone means people won’t have to download a separate app to access it. Merchants won’t have to add it as one of a growing number of payment options, either. Apple Pay Later is implemented through a program called Mastercard Installments, which means brands and retailers don’t have to take any extra steps to add it to their offerings, according to the company.

The launch also serves as a reminder: BNPL wasn't just a pandemic phenomenon. Apple Pay Later is also launching at a time when the market in general appears to be showing more staying power than was perhaps expected upon the initial announcement. According to data released recently by Adobe, the share of online purchases made with BNPL continued to grow at a rate of 14% year-over-year, while revenue grew 27%. During this period of high inflation, there is evidence that consumers are using BNPL on smaller purchases like groceries, as well as discretionary items like furniture.

Apple appears to have product and timing on its side. Now that it will start appearing in the wild, the market will surely be taking note. As we wrote at the time of the initial launch, “A category inventor and a category leader aren’t always the same.”