‘’Will Big Tech gobble up the Buy Now Pay Later market?” is the question on everyone’s lips. The moment the rumors started circulating about Apple and Goldman Sachs planning their Apple Pay Later venture, fintech shares dropped and uncertainty prevailed amongst the fintech companies.
Fearmongers step aside – here’s a fresh perspective on the matter from an industry expert:
“Apple Pay Later is good news for banks and lenders, planting another seed in the already flourishing bank-tech collaborative landscape.”
Yaacov Martin, CEO of Jifiti
This latest development in the ever-evolving buy now pay later space confirms the direction that BNPL was bound to take anyway – taking consumer financing back to its banking roots.
White-labeling: the core of Apple’s BNPL
In their partnership, Apple will provide the checkout technology and Goldman Sachs, the consumer financing. Since Apple has enough of its own capital to underwrite its own financing program, the company could very well have branched out into buy now pay later alone. But smart tech companies, no matter how large and profitable, know that the key to success is focusing on their core business, on what they do best.
After all, apples just aren’t, well, oranges – no matter how hard they try.
There’s a lot more to financing than how much capital you have to support it – industry experience, financial data, fine-tuned algorithms and of course, regulatory compliance all play a vital role. Apple knows this, so they chose an established banking partner to underwrite the financing, someone who brings over 150 years of financial experience to the table. With the strength of a bank like Goldman Sachs behind it, Apple Pay Later is likely to succeed.
The fundamental challenge, however, is bringing these two core competencies together while still maintaining a unified, branded customer experience. A smooth, exceptional customer journey is at the heart of any successful collaboration. The way that banks and merchants are already achieving this in the point-of-sale financing space is through white-labeled tech solutions.
When you get to the core of it, Apple Pay Later is essentially white-labeled POS financing, with Goldman Sachs providing their retail financing through the Apple-branded platform.
Goldman Sachs benefits by:
- Gaining buy now pay later market share
- Scaling their consumer loan volume
- Accessing an existing brand-loyal customer base
- Quickly onboarding new merchants
- Focusing on their core business
Just One Bite Out of the Growing BNPL Pie
To what extent Apple will penetrate the market with its BNPL offering is debatable at this stage, with so many unknowns and rumors running rife about the nature of their offering. One thing that is certain though is that consumers have many other options available to them.
According to Forbes, Apple Pay Later won’t necessarily eat into the market share of existing BNPL providers based on this calculation:
According to this formula, only 25 million consumers or 10% of US adults will use Apple Pay Later (and even less so since most of BNPL users are Millennials and Generation Zers), leaving lots of room for existing and other new players.
Apple will more likely come up against the likes of Google and other Big Tech players who are building their own ecosystems, with Apple Pay Later being just one part of Apple’s own growing ecosystem.
The future of Buy Now Pay Later lies with banks
A Big Tech like Apple partnering with a leading bank like Goldman Sachs is another firm indicator of the direction that BNPL will take in the future and the crucial role that banks will play.
At the core of this partnership is a bank utilizing a white-labeled platform to deploy its consumer loan program at the point of sale, and we’ll see more and more banks following suit worldwide. This is the future of buy now pay later, and it’s happening already.
In the U.S, Citizens Bank, as Citizens Pay, provides white-labeled point-of-sale financing to merchants like BJ’s Wholesale Club. In the European market, leading banks such as CaixaBank and Crédit Agricole, already deploy their white-labeled consumer financing programs to global merchants, including IKEA.
This type of white-labeled solution creates the optimal user experience and is a win-win for all players. Consumers benefit from instant financing with competitive tier-1 lender and bank terms. Merchants increase their sales and average order value (AOV) thanks to higher approval rates, and improve their customer retention. And as for banks – they scale their consumer financing without needing to develop their own technology.
By sticking to what they do best and partnering for the rest, banks and other traditional lenders will once again become the leaders in retail finance.
Disclaimer: The information in this article is for informational purposes only, and should not be construed or relied upon as legal advice on any subject matter. The author is not responsible for any consequences whatsoever arising from the use of such information.
