Apple Inc. is pushing itself deeper in the financial services industry after deciding to sidestep partners and handle the lending itself for its ‘buy now pay later’ scheme for its products to customers.
More on their financial service
The tech giant will have a wholly-owned subsidiary that will have a service, Apple Pay later, doing the credit appraisal and making decisions for the loans.
The subsidiary, Apple Financing LLC, will have the necessary state lending licenses to offer the financial service. According to Bloomberg News, it will operate separately from the leading Apple Corporation.
It marks the first foray into handling financial services such as risk management, credit assessments, and loans. So far, Apple financial services are handled by third-party service providers, including banks and credit processers. The Apple Credit Card depends on Goldman Sachs for credit checks and lending.
In the new program, Goldman Sachs has a smaller role, and the issuer of the Mastercard payment credentials allows the completion of Apple Pay later purchases. As a part of a personal initiative known as “Breakout,” Apple has been working to move its in-house financial services. As per a Bloomberg report in March, Apple, in addition to handling credit checks, lending, and decision making, is now working on making its processing system that will eventually replace Scorecard Corp. The company is working on a new customer service process, interest calculation tools, fraud analysis, and rewards.
Appel had $200 billion in cash and liquid securities at the end of the last quarter and generated a profit of $95 billion in the previous fiscal year. Very few companies can match their financial resources. Still, Apple is not taking much risk with its latest offerings as its lending transaction will depend on the user’s credit history.
Financial services help users use their iPhones more frequently. This is why Apple wants to control the process, give new options, and collect more revenue.
On Monday, the company introduced its Apple Pay Later services at the Worldwide Developers Conference for its iOS 16 operating system. It will allow customers to split the cost of an Apple Pay transaction over six weeks, payable in four installments. The financial services program will first commence in the US and expand to more regions. Apple is also working on the long tenure called Apple Pay Monthly Installments.
This year, Apple acquired Credit Kudos Ltd. This UK-based startup uses bank data for credit assessment and lending decisions. The iPhone in-house risk assessment process will consider the consumer’s history as Apple customers, such as whether their payments for purchases on their credit cards for iTunes or any Apple product purchase have been declined or not.
