Apple and Goldman Sachs plan 'Apple Pay Later' service

Apple is working on a new service that will let consumers pay for any Apple Pay purchase in instalments over time, rivalling the “buy now, pay later” offerings popularised by services from Affirm Holdings and PayPal.

The upcoming service, known internally as Apple Pay Later, will use Goldman Sachs as the lender for the loans needed for the instalment offerings, according to sources. Goldman Sachs has been Apple’s partner for the Apple Card credit card since 2019, but the new offering isn’t tied to the Apple Card and doesn’t require the use of one, the sources said.

The “buy now, pay later” system could help drive Apple Pay adoption and convince more users to use their iPhone to pay for items instead of standard credit cards. Apple receives a percentage of transactions made with Apple Pay, driving additional revenue to the company’s more than $50 billion per year services business.

The service is currently planned to work as follows: When a user makes a purchase via Apple Pay on their Apple device, they will have the option to pay for it either across four interest-free payments made every two weeks, or across several months with interest, one of the people said. The plan with four payments is called “Apple Pay in 4” internally, while the longer-term payment plans are dubbed “Apple Pay Monthly Instalments.”

When making purchases through an Apple Pay Later plan, users will be able to choose any credit card to make their payments over time. The service is planned to be available for purchases made at either retail or online stores. Apple already offers monthly instalments via the Apple Card for purchases of its own products, but this service would expand that technology to any Apple Pay transaction.

The interest rates that Apple plans to charge for the monthly instalments were not divulged. Affirm charges as much as 30 per cent annual percentage rates, while other rivals charge less. The interest-free four instalment plans would rival similar systems like ones from Australia's Afterpay, Sweden's Klarna Bank and US-based Sezzle, in addition to PayPal’s popular Pay in 4 service.

Affirm shares fell 10 per cent on Tuesday on the news, while PayPal recovered losses to end down just 0.6 per cent. Afterpay slumped 9.6 per cent in Sydney on Wednesday morning.

People who want to use the Apple Pay Later service will need to be approved via an application submitted through the iPhone’s Wallet app, where they will also be able to manage their payments. Users will need to submit a copy of their local ID card to apply for the programme. Apple will also offer customers the ability to exit payment plans to pay off the remainder of their purchase balance.

At least some of the Apple Pay Later plans will also exclude late fees and processing fees, only costing users interest for longer-term plans. The service will also not require running a credit check on the user. Separately, the company is also testing a feature that will let users create temporary, digital Apple Pay Later credit cards for individual purchases.

Apple’s new service is still in development and its features could change or be cancelled, sources said. Spokespeople for Apple and Goldman Sachs declined to comment.

On an earnings call earlier on Tuesday, Goldman Sachs' chief financial officer Stephen Scherr said he believes there are “more opportunities to be had with Apple”. Goldman’s alliance with consumer companies like Apple is aimed at helping it find a footing in the world of consumer banking – an expansion it has sought in recent years to spread its reach beyond the world of high finance on Wall Street.

Apple’s iPhone-based payment service is accepted at 85 per cent of all US retailers, according to the company. The new service would mark one of the largest additions to the service since its launch in 2014, following other features like peer-to-peer payments. Apple last year acquired a company that developed technology to allow phones to receive payments by tapping another phone or credit card on its back, adding another potential feature to the Apple payments road map.

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