Sources: Apple will use Apple ID data for identity verification and fraud prevention, rely on credit reports and FICO scores for its buy now, pay later service
Tech giant will approve borrowers and fund loans itself rather than rely on a bank — Apple Inc. tiptoed into finance …
Wall Street JournalAnnaMaria Andriotis
Context & Ripple Effects
Apple's BNPL push has been a steady retreat from partners. The service began as a joint effort with Goldman Sachs in mid-2021, but by June 2022 Apple had formed its in-house lending subsidiary, Apple Financing LLC, to run credit checks and make loan decisions itself — a first for the company, and a continuation of the shift that saw it drop Barclays as a credit-card financing partner in 2020.
First-order effects
Apple Financing LLC will approve borrowers and fund loans directly, making FICO scores and credit reports core inputs to an underwriting process Apple now owns end to end.
Apple ID data becomes a fraud-prevention and identity-verification asset inside a consumer-lending product, giving Apple's account system a financial-services job it did not previously have.
Second-order effects
Goldman Sachs' role shrinks from prospective BNPL partner to bystander, since Apple no longer needs a bank to originate these installment loans.
Affirm and other BNPL rivals face a competitor whose underwriting can draw on Apple ID and device data — a signal Bloomberg later reported Apple would extend to spending history and Apple Card applications.
Third-order effects
If the model holds, large platforms become their own lenders, with proprietary identity and behavioral data substituting for parts of traditional bank underwriting — consistent with the Financial Times reporting that Apple is laying technical groundwork for a bigger share of financial services.
The trend: Consumer lending is shifting from bank-partnership models to platform-native credit, where a tech company's own user data does work that banks and bureau scores used to own alone.
They should have said “everywhere in the US where Apple Pay is accepted,” but clearly that doesn't have the same allure as the one they chose. 🤦♂️ So many mainstream news sources here in the UK have mentioned Apple Pay Later in their coverage even though it isn't releasing here.
The wording Apple used to introduce Apple Pay Later at WWDC was very misleading. 🥴 They said available “everywhere Apple Pay is accepted” but the truth is, out of the more than 60 countries Apple Pay is available in, Apple Pay Later is only available in the US.
Apple would never 🙄 [Link to BI article with a screen cap of a quote: “Apple has a tremendous amount of data on every person who has an iPhone, and they could leverage that to increase spending through Buy Now, Pay Later. And we found through the research that people aren't reall…
“Much like a bank, #Apple will rely on credit reports and FICO scores to check applicants' financial standing. It also plans to use its giant store of Apple ID data for #identity verification and #fraud prevention” cc @LMAtem @EmLindley https://www.wsj.com/... v/ @AAndriotis http…
Apple just the latest example of how financial services are becoming a feature rather than a business. High engagement apps will continue to simply bundle them in. Fintechs need to become the low cost provider or )less likely) win the engagement game https://www.wsj.com/... https…
One of the things I am not happy about is Apple getting into “Buy now, pay later”. These services are extremely harmful for consumers and push them further in debt. It is yet to see how Apple charges penalties, when people are not able to pay. https://www.theverge.com/...
Of course Apple is getting into an exploitative practice that underwrites an endless, unsustainable cycle of production and consumption that will never make us happier or more fulfilled but will make us poorer while killing the planet and ourselves. https://twitter.com/...