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In the United States, Apple Pay Later has finally arrived, albeit so far only to a random subset of users running Apple Pay on the current version of its operating system. Mastercard Installments is integral to the offering as it enables the splitting of online or in-app purchases into four payments from a linked debit card over six weeks. Goldman Sachs too has a role as the issuer of the Mastercard-branded credentials involved, though the underwriting and lending itself (for borrowers qualifying through a soft credit check) is carried out by an Apple subsidiary.
The existence of such an entity distinguishes this particular BNPL from its competitors, all of which lack the abundant resources of the world's most valuable company by market capitalisation. As expected, there are no fees and also zero interest, increasing competitive pressures on players such as Affirm and PayPal who have been busily adapting their business models to cope with a tighter-funding and higher-rate environment.
Despite its size, Apple is still taking somewhat of a risk with its premium-brand positioning given that BNPL, as a credit option, has been steadily working its way into essentials and, with that, deeper into subprime segments. The economics of interchange too, means that the method is unlikely to see a quick entrance into Europe or any other market with capped fees. However, once full domestic rollout has taken place, Apple Pay Later will be top of wallet in America's most popular phone by way of an app that is already accepted by over 85 per cent of retailers in the country.
Regulators have had ample time to prepare for this launch, first announced ten months ago, and will be particularly aware of the probability that the facility will also in time extend to the offline point of sale. Last July, CFPB director Rohit Chopra said in an interview that "Big Tech's ambitions when it comes to Buy now, pay later are inextricably linked to the desire to dominate the digital wallet" seeing danger in particular to the country's traditional separation of banking and commerce.
Another new presence at the online checkout later this year should be Paze, the forthcoming digital wallet from the same group of big banks responsible for Zelle. The brand name was first reported by the Wall Street Journal, citing unnamed sources, who also told the newspaper that a pilot is planned over the summer. The hope is that consumers (and merchants) will perceive a clear gain despite the already crowded array of payment options available for e-commerce users.
With Apple Pay so rooted in the space and now distinguishing itself with a pay-later option, this could prove a tall order, even for Wall Street. But readers will remember that it once seemed impossible for Venmo, which effectively owned US P2P in 2016 and had entered dictionaries as a new word, to forfeit its dominance. Last year it processed $245bn (up seven per cent over 2021) compared to Zelle's $629bn (up 28 per cent).
With fintechs in Europe and the United States bracing for a market shakeout, counterparts in the wider world, often propelled by interventionist governments and a comparative glut of funding, continue to push forward on the back of a fast-rising user base. This week it was China's turn to deliver big news with Alibaba's announcement of its breakup into six distinct companies. Each of these new firms could well grow to enormous proportions in coming years, especially Global Digital Commerce Group, which includes two giants of online retail: Lazada and marketplace AliExpress.
Of the six, Alibaba is retaining complete control of only one, Taobao Tmall Commerce Group (the others offer Cloud/AI services, food delivery/local mapping, logistics and media production/streaming). Considering that Ant, of which Alibaba owns just under a third, was already spun out and sooner or later destined for a public offering, the net effect of these moves would appear to be a leaner Alibaba less concerned with disintermediating a wide variety of markets and more focused on its original domain of domestic e-commerce.
Other stories of interest this week...
Brazil: Payments giants eye billion-dollar Pismo purchase
Europe: Ingenico acquires smartphone payment acceptance fintech Phos
Ireland: Contactless payments rose over 30 percent last year
US/Europe: How rising interest rates are exposing bank weaknesses
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