Apple will handle the loan itself with a new Pay Later service

(Bloomberg) – Apple Inc. will handle the loan itself for a new “buy now, pay later” offer, avoiding partners as the tech giant pushes deeper into the financial services sector.

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A wholly-owned subsidiary will oversee credit checks and make loan decisions for the service, which is called Apple Pay Later. The company – Apple Financing LLC – has the necessary state loan licenses to offer the feature, although it operates separately from the main Apple company, the company said.

The move marks the first time Apple has handled key financial tasks such as lending, risk management and credit scoring. It’s a big change for a company that started out selling computers. Until now, Apple’s financial services have been backed by third-party credit processors and banks. The Apple Card credit card, for example, relies on Goldman Sachs Group Inc. for lending and credit reporting.

Goldman Sachs retains a smaller role in the new program. The financial company is the issuer of the Mastercard payment identifier used to make Apple Pay Later purchases. Apple Financing does not have its own banking charter.

Apple has worked to move many elements of its financial services in-house in a secret initiative dubbed “Breakout,” Bloomberg reported in March. In addition to taking over loans, credit checks and decision making, Apple is working on its own payment processing engine to eventually replace CoreCard Corp. It is also working on new customer service features, fraud analysis, interest calculation tools and rewards for other services.

Few companies can match Apple’s financial resources. It had nearly $200 billion in cash and marketable securities at the end of the last quarter and generated nearly $95 billion in profit in the last fiscal year.

Financial services help users stay glued to their iPhones. That’s why the company wants more control over the process, allowing it to roll out new options faster and potentially generate more revenue.

Apple Pay Later – introduced Monday at the company’s Worldwide Developers Conference as part of the iOS 16 operating system – will allow customers to spread the cost of any Apple Pay transaction into four installments over six weeks. The program will only run in the United States initially, though Apple plans to eventually expand its new financial services to other regions.

The company is also working on a longer-term “buy now, pay later” program called Apple Pay Monthly Installments, Bloomberg reported. While the short-term Apple Pay Later offer doesn’t use Goldman Sachs or other major partners, the longer-term plan is likely to rely on an array of other companies – including Goldman Sachs – who might offer different plans and interest rates. . In April, Goldman Sachs CEO David Solomon said his company was “very comfortable” with the partnership with Apple.

Earlier this year, Apple acquired British startup Credit Kudos Ltd., which uses bank data to make lending decisions. The iPhone maker’s internal risk assessment engine will take into account consumers’ history as Apple customers, such as whether they have regularly paid for purchases or whether their credit card has ever been attached to iTunes or the App Store, Bloomberg reported in March.

Beyond the pay later service, Apple plans to use its in-house loans and technology for an upcoming iPhone hardware subscription program. However, he has no immediate plans to drop Goldman Sachs for Apple Card or other banking partners for normal Apple Pay transactions.

Apple’s “buy now, pay later” push is seen as a threat to Affirm Holdings Inc. and Klarna Bank AB, which provide similar services. On Tuesday, Affirm CEO Max Levchin said he wasn’t worried about Apple’s offer.

“There is plenty of room for growth for everyone involved,” he said.

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