Apple Pay Later, Tech Giant’s BNPL Entry, Off to Strong Start

Apple may be a Johnny-come-lately in the buy now, pay later sector, but it certainly is gaining ground with consumers fast. Apple Pay Later has already bypassed some popular brands in market share, including Sezzle and Zip, according to J.D. Power research.

Apple began phasing in its buy now, pay later service in late March and research by J.D. Power shows it has taken off like a rocket.

In a survey of 8,000 consumers in May and June, 33.8% said they had used some form of buy now, pay later in the previous 90 days. Of the BNPL users, nearly one-fifth — 19% — said that they had used Apple Pay Later in its first three months.

Though Apple is not in the leading position, its 19% share of BNPL users is impressive and exceeds some brands that have been around longer, including Sezzle and Zip.

Miles Tullo, managing director of banking and payments at J.D. Power, attributes this to the strength of Apple’s brand recognition, the quality of its technology and the increasing breadth of its intertwined financial services portfolio. All of its services, including the Apple Card, Apple Savings, Apple Cash and the Apple Pay digital wallet, work only with the company’s iPhone.

“Apple has some sizable advantages over its BNPL competitors, who had to attract users and build merchant acceptance one at a time,” Tullo writes in a J.D. Power report. “Apple was able to instantly tap its army of Apple Pay users and existing global acceptance footprint to create instant scale.”

Apple Pay Later: In the Middle of the Pack … For Now

The tech giant’s approach to financial services is often described as a “walled garden.” The goal is to create an ecosystem so convenient and interconnected that consumers end up centralizing their banking activity there.

To understand how interconnected Apple’s products are, consider its two digital wallets. The Apple Pay digital wallet is what consumers use to make purchases with an iPhone in stores, in apps and online. Apple Wallet is another kind of digital wallet on the iPhone. It’s where consumers can access Apple Pay, store information about their cards, including Apple Card, and store other things like tickets and credentials. The cards stored in Apple Wallet can be used to buy things via Apple Pay.

It’s worth noting that an emerging consumer trend runs counter to this interconnected approach: Findings in multiple studies indicate people are increasingly diversifying their financial relationships among multiple providers. (For deeper dives on that trend, see “Are Your Customers Cheating on You?”  and “Are You Fighting Yesterday’s Checking Account War Instead of Today’s?“)

To put Apple Pay Later’s progress in perspective, it is still behind some of the major BNPL brands.

PayPal, a pioneer in buy now, pay later, had nearly double the usage of Apple, based on the survey results. It captured the leading position, with 39% of BNPL users saying they had used it in the prior three months. Next came Afterpay, which is owned by Block (at 33%) and Klarna (at 26%).

BNPL options are proliferating, with new players entering the market and variations of the idea based on bank credit cards cropping up. The original fintech BNPL providers also have been expanding their menu of options to include a version of the service tied to cards.

Read more: Enthusiasm for Apple Savings Account High Among Millennials and Gen Z

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Preferences of BNPL Users Differ by Generation

The J.D. Power research breaks down usage of the various BNPL services by generation. It shows that some groups favor specific brands. Zip, for example, skews younger, while PayPal skews older, in terms of the BNPL users they attract.

In contrast, Apple Pay Later has appeal across the board, without any generational divide apparent — which, Tullo notes, bodes well for its growth prospects.

Earlier research, conducted after the launch of Apple Pay Later, indicated that it was attracting a higher percentage of overextended users than other brands. This “may have resulted from existing BNPL users’ willingness to try a new payment option,” the J.D. Power study says.

However, that is no longer an issue: “The average Apple Pay Later user tended to be more financially healthy than most other BNPL customers, potentially giving it a more sustainable user base than its competitors.”

Both the Apple and PayPal brands benefit from a lot of consumer trust, which is key for adoption.

Morning Consult’s “Most Trusted Brands 2023 ” report found that, in the United States, Apple Pay rated eighth highest among banking and payments providers, while PayPal was third. Apple also came in eighth in the ranking of technology companies.

Read more: 43% of Consumers Deposit Pay in a Bank, But Use Fintechs for Everything Else

A Deep Dive on Apple’s Financial Services Strategy

A webinar detailing Apple’s activities in the banking and payments sector — presented by The Financial Brand and Mintel Comperemedia — is available on demand.

See “What’s the Future of Apple in Financial Services?”

In the webinar, Lierin Ehmke Melvin, director of insights for Comperemedia, dissects Apple’s strategy, the value proposition behind the growing list of financial products it offers, and its next most likely moves, not only in the near term, but looking a decade out.

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