Explained: Apple’s Buy Now Pay Later service

Apple introduced a new service called Buy Now Pay Later or Apple Pay Later at its Worldwide Developers’ Conference (WWDC) 2022 earlier this week. The service, as the company explains, enables Apple Pay users to split the cost of an Apple Pay purchase into four equal payments that are spread over a span of six weeks.

What makes this service more utilitarian for shoppers is the fact that the service offers split payments with zero interest and no fees of any kind. “Apple Pay Later makes it easy to view, track, and repay Apple Pay Later payments within Wallet. Users can apply for Apple Pay Later when they are checking out with Apple Pay, or in Wallet,” Apple wrote in its blog post explaining the feature.

As far as availability is concerned, Apple said that Apple Pay Later is available everywhere Apple Pay is accepted online or in-app. But there’s a catch, since the service uses Mastercard’s network, users will have to use Apple’s Mastercard-based credit card, which is issued by Goldman Sachs, in order to use the service.

How does Apple’s Pay Later service work?

While on the surface, the service seems quite simple to use, in its background lies a well thought-out plan by Apple. According to a report by CNBC, Apple has created a separate subsidiary called Apple Financing LLC to fund its Apple Pay Later service. This new company has necessary permissions from the US’ Treasury department to offer such a service and it is separate from Apple’s core business.

As per the report, Apple Financing LLC will conduct a soft check credit check of users, which will include pulling customer’s credit and other data, such as the customer’s purchase and payment history with Apple in both its stores and online services, in order to judge a customer’s creditworthiness. The Apple subsidiary will use this information to extend short-term loans to the Apple Pay Later customers.

As per a Bloomberg report, this creditworthiness check of a user for issue smaller loans will be handled by the company’s in-house risk assessment engine, which comes as a courtesy of a UK-based startup called Credit Kudos Ltd that Apple acquired earlier this year.

Furthermore, to offer this service, Apple has partnered with Mastercard, which interacts with the vendors to enable people buy a product in installments. In addition to that, Goldman Sachs is involved as the technical issuer of loans. However, Apple is not relying on the bank’s balance sheet or credit decisions to offer the loan, CNBC reported.

What is the credit limit?

CNBC says that credit under Apple’s Pay Later service is likely to be capped at $1,000 or 77,775.

What if I miss a payment?

If a user misses a payment under Apple Pay Later service, Apple will no longer extend credit to those users. However, the company will not report the missed payments to credit bureaus.

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