Apple’s rapidly expanding financial services make it almost like a bank

Apple’s going to handle the lending for its new buy now, pay later (BNPL) service, and doesn’t plan on shifting that responsibility to a financial service, according to reports from Bloomberg and CNBC. The company’s subsidiary, Apple Financing LLC, is reportedly licensed to provide lending services and will remain separate from Apple’s main business.

Apple announced its BNPL service, Pay Later, at its annual Worldwide Developers Conference (WWDC) on Monday. The service will let users make a purchase through Apple Pay, and then pay back that amount in four equal installments over the course of six weeks with no interest.

This isn’t Apple’s first foray into finances, but, as Bloomberg notes, it is the first time it’s taking on financial responsibilities including credit checks and lending. It currently partners with Goldman Sachs to carry out these tasks for its Apple Card credit card, with the financial firm playing a smaller, but not insignificant part in Apple’s new Pay Later service. People will have to use Apple’s Mastercard-based credit card, which is issued by Goldman Sachs, in order to use Pay Later. Bloomberg notes that Apple Financing doesn’t have its own bank charter (so no, Apple’s technically and legally not a bank).

According to CNBC, Apple will run soft credit checks when a person applies for its Pay Later Service. The outlet also reports that Apple won’t extend additional credit to users who miss payments, and that they also won’t count against a user’s overall credit score — Apple reportedly won’t report missed payments to credit bureaus. It’s unclear how much Apple will let users spend, but CNBC predicts Apple Pay Later will have a cap of about $1,000. We also don’t know whether Apple will charge a late fee for missed payments, and the company didn’t immediately respond to The Verge’s request for comment.

Apple’s move to consolidate financial services under one — albeit separate — roof indicates a potentially harder push into finances in the future. It also signals a wider goal of keeping users in its ecosystem. With Apple offering access to its Card and new Pay Later service from within Apple Pay, you’re virtually locked into owning and holding onto your iPhone to easily use most of its features. Pay Later is set to roll out to customers in the US first, before expanding later to other countries.

BNPL services have come under fire for the potential risk they pose to consumers, and Apple’s Pay Later is no exception. Customers who use these services are more likely to overdraft, and many struggle to repay their loans. Existing BNPL services like Klarna, Affirm, and Afterpay have come under scrutiny from government regulators over the potential risks they pose to consumers.

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