Apple makes a blunder & scraps its Pay Later loan scheme

Apple makes a blunder and now admits its mistake by ending its in-house buy now, pay later scheme in the US, only a year after it was launched.

Apple makes a blunder

The decision marks a retreat for Apple from plans to offer traditional financial services, something investors warned against last year.

This does not impact any existing borrowers will be able to continue managing payments using Apple’s Wallet app.

The American technology giant says it will now offer customers payment plans through third-party credit and debit card lenders.

Why did Apple do a U-turn?

Apple did a U-turn because of the pressure from the banking markets. This service would have significantly impacted the viability for financial firms, who had been lobbying Apple for the last 123 months. Who were worried about the precedent it would set for other companies to follow.

The US financial market is heavily leveraged in interest based short term loans and payment plans. Had this been successful, this effectively would have made them redundant.

Apple’s Pay Later scheme received a huge backlash in the banking markets which warned against offer interest free payments on their products, which would impact the revenue of lenders.

What was Apple Pay Later?

This was an installment payment option launched only in the US. Apple Pay Later allowed users to break up the cost of purchases worth up to $1,000 (£788) into four instalments over six weeks without having to pay interest or fees.

The scheme represented a move into providing financial services, with Apple effectively offering customers loans, instead of resorting to banks and other traditional lenders.

The company used a new subsidiary, Apple Financing, to issue the loans.

Apple is a giant in revenue in the US market and why did Apple do a U-turn? Well in essence it came at a time when US interest rates were close to zero, making both borrowing much more attractive.

However, as central banks put up rates to tackle rising prices, such plans became less appealing.

Apple leverages Pay Later for IOS 18

Apple makes a blunder but very rarely suffers. The American tech giant has used this to leverage integrated 3rd party finance in IOS 18 to develop its enclosed ecosystem further.

During its annual developer event last week, Apple announced that it would be partnering with banks , including Citi in the US, HSBC in the UK and ANZ in Australia, to offer instalment payment options.

The new payment options will be made available on its upcoming iOS 18 operating system, which is expected to be released later this year.

IOS 18 is expected to include significant advancements for users to purchase products using pay Later schemes in Apple’s ecosystem. With special unique deals only available via Apple Pay.