CUPERTINO, Calif.–In addition to announcing it is moving into the BNPL space, Apple has also made another move related to Apple Pay that has drawn fewer headlines: it plans to underwrite the BNPL loans itself.
That’s a change from how it underwrites the financing on its Apple Pay credit card launched three years ago, on which it has partnered with Goldman Sachs.
With the BNPL offering, which will allow buyers to finance their purchases into four payments every two weeks, Apple is taking the risk of absorbing any losses when borrowers fail to repay. The company is moving forward with the plan which is called Apple Pay later, and has obtained lending licenses in most states to offer the new payment plans, according to Bloomberg.
To date, most non-financial companies have partnered with financial firms to handle the vetting of risk. But Apple believes it has the expertise and access to data to handle the underwriting itself, Bloomberg stated, noting it plans to rely on credit reports and FICO scores to check applicants’ financial standing, as well as its own massive store of Apple ID data for identity verification and fraud prevention.
Comfortable With Risk
With Apple Pay, the tech giant also partnered with Goldman Sachs because of concerns around reputational risk.
“The company now feels comfortable becoming a lender in part because of the small dollar amount and short duration of the payment plans, people familiar with the matter said,” according to Bloomberg. “Payment plans per transaction will max out at $1,000, and the amount for which consumers are approved will depend on their credit reports and scores.”
Apple said its new buy now, pay later service won’t charge interest or late fees.