Apple has recently announced its plans of launching Apple Pay Later in September. Though the company did not use the term ‘buy now, pay later’ the upcoming service will allow consumers to pay in four installments over six weeks, making it a BNPL service.
The popularity of the BNPL industry has exploded tremendously in a short period: it grew from $33 billion in 2020 to $120 billion last year, according to GlobalData. The industry is now expected to grow at an annual rate of 26 percent.
Apple is known for entering markets with clear opportunities and potential growth, and its move into BNPL consumer finance now proves the same. Though it can legitimize the services of the relatively new industry, Apple’s market dominance can threaten the existence of the existing players.
“Apple devices are the gateway for many consumers shopping online. The more seamlessly they can integrate into the shopping experience, the less likely customers are to use other services,” Alykhan Sunderji, the Chief Council at Sunder Legal, told Finance Magnates.
And, Apple is following exactly this strategy. The tech giant is going to integrate its pay later services into its existing Apple Pay services. The service will require a ‘soft’ credit check of the consumer and a review of their transaction history with Apple.
Shannon Vissers, a Retail and Shopping Analyst at MerchantMaverick.com, explained: “Apple will have a competitive advantage, since its BNPL product makes it even easier for Apple users to take out a BNPL loan; for existing Apple Pay users, Apple’s Pay Later will be just another effortless payment option that appears in your Apple Wallet.”
Advantage: Fair or Unfair?
The dominance of Apple Pay in the United States’ retail payments
Payments
One of the bases of mediums of exchange in the modern world, a payment constitutes the transfer of a legal currency or equivalent from one party in exchange for goods or services to another entity. The payments industry has become a fixture of modern commerce, though the players involved and means of exchange have dramatically shifted over time.In particular, a party making a payment is referred to as a payer, with the payee reflecting the individual or entity receiving the payment. Most commonly the basis of exchange involves fiat currency or legal tender, be it in the form of cash, credit or bank transfers, debit, or checks. While typically associated with cash transfers, payments can also be made in anything of perceived value, be it stock or bartering – though this is far more limited today than it has been in the past.The Largest Players in the Payments IndustryFor most individuals, the payments industry is dominated currently by card companies such as Visa or Mastercard, which facilitate the use of credit or debit expenditures. More recently, this industry has seen the rise of Peer-to-Peer (P2P) payments services, which have gained tremendous traction in Europe, the United States, and Asia, among other continents.One of the biggest parameters for payments is timing, which looms as a crucial element for execution. By this metric, consumer demand incentivizes technology that prioritizes the fastest payment execution.This can help explain the preference for debit and credit payments overtaking check or money orders, which in previous decades were much more commonly utilized. A multi-billion-dollar industry, the payments space has seen some of the most innovation and advances in recent years as companies look to push contactless technology with faster execution times.
One of the bases of mediums of exchange in the modern world, a payment constitutes the transfer of a legal currency or equivalent from one party in exchange for goods or services to another entity. The payments industry has become a fixture of modern commerce, though the players involved and means of exchange have dramatically shifted over time.In particular, a party making a payment is referred to as a payer, with the payee reflecting the individual or entity receiving the payment. Most commonly the basis of exchange involves fiat currency or legal tender, be it in the form of cash, credit or bank transfers, debit, or checks. While typically associated with cash transfers, payments can also be made in anything of perceived value, be it stock or bartering – though this is far more limited today than it has been in the past.The Largest Players in the Payments IndustryFor most individuals, the payments industry is dominated currently by card companies such as Visa or Mastercard, which facilitate the use of credit or debit expenditures. More recently, this industry has seen the rise of Peer-to-Peer (P2P) payments services, which have gained tremendous traction in Europe, the United States, and Asia, among other continents.One of the biggest parameters for payments is timing, which looms as a crucial element for execution. By this metric, consumer demand incentivizes technology that prioritizes the fastest payment execution.This can help explain the preference for debit and credit payments overtaking check or money orders, which in previous decades were much more commonly utilized. A multi-billion-dollar industry, the payments space has seen some of the most innovation and advances in recent years as companies look to push contactless technology with faster execution times. Read this Term space will further push the Pay Later service. The number of Apple Pay users was estimated to be 507 million globally in 2020 after gaining 66 million that year. In addition, it captures 43.9 percent of the mobile payments market in the United States.
All these metrics clearly indicate that Apple Pay Later will have a major advantage in the BNPL sector.
Moreover, unlike Apple, most of the BNPL providers usually rely on their partnerships with other payment providers and e-commerce platforms. If those deals go sour, those platforms would lose their market share overnight. However, this is not even a concern for Apple Pay Later, as the tech giant has created a massive ecosystem over the years.
“But, [Apple Pay Later] won’t necessarily kill the BNPL business,” said Sunderji.
“We often see multiple checkout options on an e-commerce website because customers have different preferences. I think we will continue to see multiple options for BNPL, and these options will drive healthy competition to please customers.”
Interesting Timing
Additionally, Apple is launching its BNPL services when the majority of the industry is struggling. Affirm, which is one of the biggest BNPL players, has lost 3/4 of its stock value since the beginning of the year, and Klarna laid off 10 percent of its workforce in May.
Now, Apple’s move into space has pushed these BNPL stocks even lower.
Shannon Vissers, a Retail and Shopping Analyst at MerchantMaverick.com
“The more players there are in the industry, the harder it will be for each BNPL product to stand out from its competitors,” Vissers added. “It remains to be seen which players will remain standing in the end, but I think a year from now there will be fewer BNPL players than there are now. It’s also not out of the question that Apple, PayPal, and/or Block might acquire and absorb some of their BNPL competitors.”
Upcoming Regulations
Regulation
Regulation
Like any other industry with a high net worth, the financial services industry is tightly regulated to help curb illicit behavior and manipulation. Each asset class has its own set of protocols put in place to combat their respective forms of abuse.In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order. Who are the Industry’s Leading Regulators?Regulators such as the UK’s Financial Conduct Authority (FCA), the US’ Securities and Exchange Commission (SEC), Australian Security and Investment Commission (ASIC), and the Cyprus Securities and Exchange Commission (CySEC) are the most widely dealt with authorities in the FX industry.In its most basic sense, regulators help ensure the filing of reports and transmission of data to help police and monitor activity by brokers. Regulators also serve as a countermeasure against market abuse and malpractice by brokers. Brokers adhering to a list of mandated rules are authorized to provide investment activities in a given jurisdiction. By extension, many unauthorized or unregulated entities will also seek to market their services illegally or function as a clone of a regulated operation.Regulators are essential in snuffing out these scam operations as they prevent significant risks for investors.In terms of reporting, brokers are also required to regularly file reports about their clients’ positions to the relevant regulatory authorities. The most-recent regulatory push in the aftermath of the Great Financial Crisis of 2008 has delivered a material shift in the regulatory reporting landscape.Brokers typically outsource the reporting to other companies which are connecting the trade repositories used by regulators to the broker’s systems and are handling this crucial element of compliance.Beyond FX, regulators help reconcile all matters of oversight and are watchdogs for each industry. With ever-changing information and protocols, regulators are always working to promote fairer and more transparent business practices from brokers or exchanges.
Like any other industry with a high net worth, the financial services industry is tightly regulated to help curb illicit behavior and manipulation. Each asset class has its own set of protocols put in place to combat their respective forms of abuse.In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order. Who are the Industry’s Leading Regulators?Regulators such as the UK’s Financial Conduct Authority (FCA), the US’ Securities and Exchange Commission (SEC), Australian Security and Investment Commission (ASIC), and the Cyprus Securities and Exchange Commission (CySEC) are the most widely dealt with authorities in the FX industry.In its most basic sense, regulators help ensure the filing of reports and transmission of data to help police and monitor activity by brokers. Regulators also serve as a countermeasure against market abuse and malpractice by brokers. Brokers adhering to a list of mandated rules are authorized to provide investment activities in a given jurisdiction. By extension, many unauthorized or unregulated entities will also seek to market their services illegally or function as a clone of a regulated operation.Regulators are essential in snuffing out these scam operations as they prevent significant risks for investors.In terms of reporting, brokers are also required to regularly file reports about their clients’ positions to the relevant regulatory authorities. The most-recent regulatory push in the aftermath of the Great Financial Crisis of 2008 has delivered a material shift in the regulatory reporting landscape.Brokers typically outsource the reporting to other companies which are connecting the trade repositories used by regulators to the broker’s systems and are handling this crucial element of compliance.Beyond FX, regulators help reconcile all matters of oversight and are watchdogs for each industry. With ever-changing information and protocols, regulators are always working to promote fairer and more transparent business practices from brokers or exchanges. Read this Term is another concern for the BNPL industry. The industry is now unregulated, but regulators actively considering tightening the industry.
One of the regulatory areas would be checking the financial history of potential consumers before allowing BNPL services. Apple has a clear advantage here.
Alykhan Sunderji, Chief Council at Sunder Legal
“When Apple uses its own data to make a credit decision, it doesn’t have to comply with various regulations under the Fair Credit Reporting Act (like sending a formal notice if someone has been denied credit). But, we’ve seen that whenever consumers are offered easy credit in an unregulated environment, disaster is not far away,” said Sunderji.
Despite Apple’s entrance into the industry, the retail payment markets are too big. Apple Pay is dominant in the US and some other countries, but several local payment modes still dominate in Europe, Asia and other parts of the world.
“There are myriad factors working against BNPL at the moment: looming regulations, too many companies offering a nearly identical product, rising public skepticism of BNPL as we discover how financially harmful these products are to young consumers, rising interest rates and the increasingly real prospect of a recession in the coming months,” added Vissers.
“All that said, I don’t think BNPL will disappear entirely. In a few years, there will still be two or three big BNPL players (likely including Apple), though the products will be more carefully regulated.”
Apple has recently announced its plans of launching Apple Pay Later in September. Though the company did not use the term ‘buy now, pay later’ the upcoming service will allow consumers to pay in four installments over six weeks, making it a BNPL service.
The popularity of the BNPL industry has exploded tremendously in a short period: it grew from $33 billion in 2020 to $120 billion last year, according to GlobalData. The industry is now expected to grow at an annual rate of 26 percent.
Apple is known for entering markets with clear opportunities and potential growth, and its move into BNPL consumer finance now proves the same. Though it can legitimize the services of the relatively new industry, Apple’s market dominance can threaten the existence of the existing players.
“Apple devices are the gateway for many consumers shopping online. The more seamlessly they can integrate into the shopping experience, the less likely customers are to use other services,” Alykhan Sunderji, the Chief Council at Sunder Legal, told Finance Magnates.
And, Apple is following exactly this strategy. The tech giant is going to integrate its pay later services into its existing Apple Pay services. The service will require a ‘soft’ credit check of the consumer and a review of their transaction history with Apple.
Shannon Vissers, a Retail and Shopping Analyst at MerchantMaverick.com, explained: “Apple will have a competitive advantage, since its BNPL product makes it even easier for Apple users to take out a BNPL loan; for existing Apple Pay users, Apple’s Pay Later will be just another effortless payment option that appears in your Apple Wallet.”
Advantage: Fair or Unfair?
The dominance of Apple Pay in the United States’ retail payments
Payments
One of the bases of mediums of exchange in the modern world, a payment constitutes the transfer of a legal currency or equivalent from one party in exchange for goods or services to another entity. The payments industry has become a fixture of modern commerce, though the players involved and means of exchange have dramatically shifted over time.In particular, a party making a payment is referred to as a payer, with the payee reflecting the individual or entity receiving the payment. Most commonly the basis of exchange involves fiat currency or legal tender, be it in the form of cash, credit or bank transfers, debit, or checks. While typically associated with cash transfers, payments can also be made in anything of perceived value, be it stock or bartering – though this is far more limited today than it has been in the past.The Largest Players in the Payments IndustryFor most individuals, the payments industry is dominated currently by card companies such as Visa or Mastercard, which facilitate the use of credit or debit expenditures. More recently, this industry has seen the rise of Peer-to-Peer (P2P) payments services, which have gained tremendous traction in Europe, the United States, and Asia, among other continents.One of the biggest parameters for payments is timing, which looms as a crucial element for execution. By this metric, consumer demand incentivizes technology that prioritizes the fastest payment execution.This can help explain the preference for debit and credit payments overtaking check or money orders, which in previous decades were much more commonly utilized. A multi-billion-dollar industry, the payments space has seen some of the most innovation and advances in recent years as companies look to push contactless technology with faster execution times.
One of the bases of mediums of exchange in the modern world, a payment constitutes the transfer of a legal currency or equivalent from one party in exchange for goods or services to another entity. The payments industry has become a fixture of modern commerce, though the players involved and means of exchange have dramatically shifted over time.In particular, a party making a payment is referred to as a payer, with the payee reflecting the individual or entity receiving the payment. Most commonly the basis of exchange involves fiat currency or legal tender, be it in the form of cash, credit or bank transfers, debit, or checks. While typically associated with cash transfers, payments can also be made in anything of perceived value, be it stock or bartering – though this is far more limited today than it has been in the past.The Largest Players in the Payments IndustryFor most individuals, the payments industry is dominated currently by card companies such as Visa or Mastercard, which facilitate the use of credit or debit expenditures. More recently, this industry has seen the rise of Peer-to-Peer (P2P) payments services, which have gained tremendous traction in Europe, the United States, and Asia, among other continents.One of the biggest parameters for payments is timing, which looms as a crucial element for execution. By this metric, consumer demand incentivizes technology that prioritizes the fastest payment execution.This can help explain the preference for debit and credit payments overtaking check or money orders, which in previous decades were much more commonly utilized. A multi-billion-dollar industry, the payments space has seen some of the most innovation and advances in recent years as companies look to push contactless technology with faster execution times. Read this Term space will further push the Pay Later service. The number of Apple Pay users was estimated to be 507 million globally in 2020 after gaining 66 million that year. In addition, it captures 43.9 percent of the mobile payments market in the United States.
All these metrics clearly indicate that Apple Pay Later will have a major advantage in the BNPL sector.
Moreover, unlike Apple, most of the BNPL providers usually rely on their partnerships with other payment providers and e-commerce platforms. If those deals go sour, those platforms would lose their market share overnight. However, this is not even a concern for Apple Pay Later, as the tech giant has created a massive ecosystem over the years.
“But, [Apple Pay Later] won’t necessarily kill the BNPL business,” said Sunderji.
“We often see multiple checkout options on an e-commerce website because customers have different preferences. I think we will continue to see multiple options for BNPL, and these options will drive healthy competition to please customers.”
Interesting Timing
Additionally, Apple is launching its BNPL services when the majority of the industry is struggling. Affirm, which is one of the biggest BNPL players, has lost 3/4 of its stock value since the beginning of the year, and Klarna laid off 10 percent of its workforce in May.
Now, Apple’s move into space has pushed these BNPL stocks even lower.
Shannon Vissers, a Retail and Shopping Analyst at MerchantMaverick.com
“The more players there are in the industry, the harder it will be for each BNPL product to stand out from its competitors,” Vissers added. “It remains to be seen which players will remain standing in the end, but I think a year from now there will be fewer BNPL players than there are now. It’s also not out of the question that Apple, PayPal, and/or Block might acquire and absorb some of their BNPL competitors.”
Upcoming Regulations
Regulation
Regulation
Like any other industry with a high net worth, the financial services industry is tightly regulated to help curb illicit behavior and manipulation. Each asset class has its own set of protocols put in place to combat their respective forms of abuse.In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order. Who are the Industry’s Leading Regulators?Regulators such as the UK’s Financial Conduct Authority (FCA), the US’ Securities and Exchange Commission (SEC), Australian Security and Investment Commission (ASIC), and the Cyprus Securities and Exchange Commission (CySEC) are the most widely dealt with authorities in the FX industry.In its most basic sense, regulators help ensure the filing of reports and transmission of data to help police and monitor activity by brokers. Regulators also serve as a countermeasure against market abuse and malpractice by brokers. Brokers adhering to a list of mandated rules are authorized to provide investment activities in a given jurisdiction. By extension, many unauthorized or unregulated entities will also seek to market their services illegally or function as a clone of a regulated operation.Regulators are essential in snuffing out these scam operations as they prevent significant risks for investors.In terms of reporting, brokers are also required to regularly file reports about their clients’ positions to the relevant regulatory authorities. The most-recent regulatory push in the aftermath of the Great Financial Crisis of 2008 has delivered a material shift in the regulatory reporting landscape.Brokers typically outsource the reporting to other companies which are connecting the trade repositories used by regulators to the broker’s systems and are handling this crucial element of compliance.Beyond FX, regulators help reconcile all matters of oversight and are watchdogs for each industry. With ever-changing information and protocols, regulators are always working to promote fairer and more transparent business practices from brokers or exchanges.
Like any other industry with a high net worth, the financial services industry is tightly regulated to help curb illicit behavior and manipulation. Each asset class has its own set of protocols put in place to combat their respective forms of abuse.In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order. Who are the Industry’s Leading Regulators?Regulators such as the UK’s Financial Conduct Authority (FCA), the US’ Securities and Exchange Commission (SEC), Australian Security and Investment Commission (ASIC), and the Cyprus Securities and Exchange Commission (CySEC) are the most widely dealt with authorities in the FX industry.In its most basic sense, regulators help ensure the filing of reports and transmission of data to help police and monitor activity by brokers. Regulators also serve as a countermeasure against market abuse and malpractice by brokers. Brokers adhering to a list of mandated rules are authorized to provide investment activities in a given jurisdiction. By extension, many unauthorized or unregulated entities will also seek to market their services illegally or function as a clone of a regulated operation.Regulators are essential in snuffing out these scam operations as they prevent significant risks for investors.In terms of reporting, brokers are also required to regularly file reports about their clients’ positions to the relevant regulatory authorities. The most-recent regulatory push in the aftermath of the Great Financial Crisis of 2008 has delivered a material shift in the regulatory reporting landscape.Brokers typically outsource the reporting to other companies which are connecting the trade repositories used by regulators to the broker’s systems and are handling this crucial element of compliance.Beyond FX, regulators help reconcile all matters of oversight and are watchdogs for each industry. With ever-changing information and protocols, regulators are always working to promote fairer and more transparent business practices from brokers or exchanges. Read this Term is another concern for the BNPL industry. The industry is now unregulated, but regulators actively considering tightening the industry.
One of the regulatory areas would be checking the financial history of potential consumers before allowing BNPL services. Apple has a clear advantage here.
Alykhan Sunderji, Chief Council at Sunder Legal
“When Apple uses its own data to make a credit decision, it doesn’t have to comply with various regulations under the Fair Credit Reporting Act (like sending a formal notice if someone has been denied credit). But, we’ve seen that whenever consumers are offered easy credit in an unregulated environment, disaster is not far away,” said Sunderji.
Despite Apple’s entrance into the industry, the retail payment markets are too big. Apple Pay is dominant in the US and some other countries, but several local payment modes still dominate in Europe, Asia and other parts of the world.
“There are myriad factors working against BNPL at the moment: looming regulations, too many companies offering a nearly identical product, rising public skepticism of BNPL as we discover how financially harmful these products are to young consumers, rising interest rates and the increasingly real prospect of a recession in the coming months,” added Vissers.
“All that said, I don’t think BNPL will disappear entirely. In a few years, there will still be two or three big BNPL players (likely including Apple), though the products will be more carefully regulated.”
