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Apple cuts out banks to offer BNPL loans directly

Apple cuts out banks to offer BNPL loans directly

Apple has taken another huge step into financial services, making loans to users of its new BNPL product directly, rather than through a banking partner.

The tech giant has set up a wholly-owned subsidiary, Apple Financing, to offer loans directly for the Apple Pay Later service. Apple had net cash of $73 billion at the end of March.

The firm had been rumoured to be using Goldman Sachs - with which it has previously partnered on a credit card - for the loans. However, Goldman is only facilitating the service as the technical issuer of the loans and the official BIN sponsor. Apple is using Mastercard's white label BNPL product, Installments.

Apple is also handling credit checks for the service inhouse. Earlier this year, it acquired UK credit bureau Credit Kudos, which uses open banking technology to deliver finely-tuned credit scores.

By taking the process inhouse, Apple will earn interchange fees from transactions and also avoid the need to share customer data with third parties.

The news is inline with a Bloomberg report from earlier this year that Apple is working to bring a host of financial services work, including payments processing, in-house to reduce its reliance on outside bank and fintech partners.

The tech giant has embarked on a multi-year plan, called 'Breakout', that would see it do payments processing, loan risk assessments, fraud analysis, credit checks and customer service work on its own.

The company already offers peer-to-peer payments, its Wallet app, a credit card and the ability for merchants to accept payments from an iPhone.

However, the company says it still does not need to apply for a banking license at this time.

Comments: (2)

A Finextra member
A Finextra member 10 June, 2022, 12:15Be the first to give this comment the thumbs up 0 likes

Does not Apple need a financial market company license as payment institution or lending company in order to be the one that holds customer receivables after having lent them the monies in connection with purchases? 

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 10 June, 2022, 16:17Be the first to give this comment the thumbs up 0 likes

Keen to know if Apple's BNPL will work only on Apple Card or any of the other credit cards used as funding source for Apple Pay.