What Apple Pay Later means for buy now, pay later marketers

Apple Pay Later might make shopping easier for customers, but it could spell trouble for other providers in the buy now, pay later space. While rumors of the new service had been circulating for several months, the digital giant announced Monday at its developer conference that the pay later function would officially become part of its Apple Pay offerings with the new iOS 16. “Apple Pay Later will likely present pretty heavy competition for existing buy now, pay later brands,” said Annie Millerbernd, a personal loans expert at Nerdwallet. Like existing options, Apple’s new feature, created with Mastercard and part of the Apple Wallet mobile offering, will allow customers to split up payments into four delayed installments with no interest. Read: Apple's iPhone updates include text editing, pay later option Sign up for Ad Age awards and events Leading Women Rising Star, 40 under 40, Small Agency awards and more Click here Existing buy now, pay later brands such as Klarna, Afterpay and Affirm have skyrocketed in usage in the U.S. in the last 18 months, as each poured marketing dollars into building awareness for their brands. A recent report from Student Beans, which works with brands on student loyalty programs, found that buy now, pay later is a top trend with Gen Z students, with 30% of U.S.-based Gen Z students using the service and 21% of U.K.-based Gen Z students using it. The top five buy now, pay later apps in the U.S. saw 11 million App Store and Google Play installations in the first five months of 2022, up 26% from the year-earlier period, according to Sensor Tower, a data intelligence provider. But Millerbernd noted that Apple’s offering will be particularly compelling to customers because of its ease of use. “Before, you would have to pick from multiple buy now, pay later companies,” she said, noting that customers also had to do their research—some buy now, pay later brands charge interest rates, some charge late fees, and some have differing return policies. “If a merchant or retailer was working with one you’d have to decide, set up an account and agree to the code of service,” she added. “Now, you’ll have one source.” Yet even before Apple Pay Later, there were signs of a slowdown in the category amid larger economic turmoil. Swedish brand Klarna recently laid off 10% of its global workforce, affecting 700 employees. A recent Wall Street Journal story noted that rising interest rates and delayed payments by consumers are causing investors to think twice about the fast-growing space. “Consumers, especially now, are looking for more transparent and flexible alternatives to credit cards,” an Affirm spokesman noted in an emailed statement. He added that the nearly 10-year-old brand’s personalized payment plans help both consumers and merchants. “Even as more providers join the movement we started, the prize remains massive and we don’t think anyone can do what our team and our technology can do," he said. Some brands are already diversifying their offerings to move beyond their buy, now pay later roots. For example, Klarna recently rolled out a virtual shopping feature for its retail partners, urging them to emulate the personalized service of in-person shopping in the digital realm. Klarna declined to comment on Apple’s new pay later offering. Afterpay and Zip did not immediately return calls requesting comment. Millerbernd said it’s hard to know how each established brand will respond to Apple’s competition, but that some might increase email marketing to past users. Sign up for Ad Age newsletters Get the latest news and analysis delivered to your inbox Click here

What Apple Pay Later means for buy now, pay later marketers

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