📱 Apple Pay Later: The Rise and Retreat of Apple’s BNPL Play

Apple Pay Later was Apple’s bold step into the Buy Now, Pay Later (BNPL) market, launched in March 2023 and shut down by June 2024. Though short-lived, it offers insights into the economics, scalability, and strategic pivots in the BNPL landscape.

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🔍 Key Features of Apple Pay Later vs. Klarna, Afterpay & Others

Feature	Apple Pay Later	Klarna	Afterpay (Block Inc)	Affirm
Parent Company	Apple Inc.	Klarna AB (Private, Sweden)	Block Inc (ASX: SQ2)	Affirm Holdings (NASDAQ: AFRM)
Launch Year	2023	2005	2014	2012
Status	Discontinued (2024)	Active	Active	Active
Model	4 payments over 6 weeks, no interest	Multiple plans, incl. 4-part, Pay Now, Pay Later	4 equal payments every 2 weeks	Monthly installments, interest-bearing
Max Transaction Size	$1,000 USD	$10,000+ (varies)	~$2,000 USD	$17,500 USD (merchantMerchant merchant An individual or business that accepts payments in exchange for goods or services. dependent)
Interest/Fees to Users	None	Some plans include interest	No interest for users	Interest varies by plan (0%-36%)
Merchant Network	Limited to Apple Pay merchants	500k+ global merchants	144k+ global merchants (2023)	250k+ merchants
Credit Check	Soft pull	Soft pull / Hard for long-term plans	None	Soft/hard pull depending on plan
Funding Partner	Apple Financing LLC, Goldman Sachs	Klarna Bank AB	Afterpay Pty Ltd, financed via Block	Cross River Bank / Affirm Bank
Platform Integration	Apple Wallet only	Klarna App + e-commerce	App + Integrated checkout	Direct + Embedded checkout

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💸 Economics & Risk Model

Factor	Apple Pay Later	Klarna	Afterpay	Affirm
Revenue Model	Merchant fees (est. ~3%)	Merchant discount + interest/spread	Merchant fees (~4%)	Merchant discount + consumer interest
Risk Underwriting	Done in-house via Apple/Goldman	Proprietary credit models	Behavioral data + limits	FICO scores, banking data
Loan Ownership	Apple Financing LLC	Klarna Bank AB	Afterpay (off-balance sheet options)	Affirm / bank partner on balance sheet
Delinquency Risk	Apple	Klarna bears own risk	Afterpay bears it	Affirm + partner banks bear it
Regulatory Coverage	FintechFintech fintech Short for financial technology, refers to tech-enabled innovation in financial services. chartered partner (Goldman)	Licensed lender (EU & US)	Licensed BNPL provider in major markets	Licensed lender

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📉 Why Did Apple Exit?

Challenge	Description
Limited Merchant Reach	Only worked at merchants that accepted Apple Pay – unlike Klarna/Afterpay.
Loan Risk	Apple self-funded loans via Apple Financing LLC, adding balance sheet risk.
Goldman Sachs Exit	Goldman Sachs sought to exit consumer finance partnerships with Apple.
Scalability	No international expansion, limited data for effective underwriting.
Competitive Market	BNPL saturation + high CAC in a crowded, regulation-heavy space.

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🔄 Strategic Pivot: From Operator to Orchestrator

In June 2024, Apple officially shut down Pay Later. Instead, it:

• Partnered with Affirm, integrating their installment options within Apple Pay.
• Announced plans to onboard more third-party lenders into Apple Wallet.
• Will not underwrite loans but act as the platform enabling the BNPL experience.

Think of this as Apple moving from “owning the rail” to “being the station.”

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📊 User Stats (Estimated)

Metric	Apple Pay Later	Klarna	Afterpay	Affirm
U.S. Users (Peak)	~3 million (2023-24)	20M+	15M+	16.9M (FY2023)
Global Presence	U.S. only	45+ countries	8 countries	Primarily U.S. + Canada
Average Loan Size	~$250	$100 – $1,000+	$150-$500	$800+

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🔚 Conclusion: Apple’s BNPL Play Was a Strategic Trial

Apple Pay Later was a strategic experiment — a move to test embedded finance and offer greater control over the checkout experience. However, the shift away from direct lending reflects Apple’s strength in platform orchestrationrather than financial risk-bearing.

By embracing players like Affirm and Klarna, Apple can still own the UX, data, and checkout flow — without the headache of credit riskCredit Risk credit-risk The possibility of loss due to a borrower's failure to make payments., collections, or regulatory compliance.

Here is the summary:

• Unlike the Apple Card, where Apple serves primarily as a marketing and UX frontend for Goldman Sachs, Apple is providing far more of the functionality tied to Apple Pay Later.
• “Apple Inc. will handle the lending itself for a new “buy now, pay later” offering, sidestepping partners as the tech giant pushes deeper into the financial services industry.
• A wholly owned subsidiary will oversee credit checks and make decisions on loans for the service, which is called Apple Pay Later. The business — Apple Financing LLC — has necessary state lending licenses to offer the feature, though it operates separately from the main Apple corporation…”
• While Apple is in-sourcing capabilities it relied on Goldman for with the Apple Card, it’s still dependent on the bank for some of the capabilities that power Apple Pay Later.
• Apple needs Goldman, its network partner MastercardMasterCard mastercard A global payments network enabling electronic transactions between banks, merchants, and cardholders., and, presumably, its processorProcessor processor A company authorized to process credit and debit card transactions between acquirers and issuers. CoreCard, to handle some elements of the payment processing.
• When a user chooses to split pay a transaction, in the background, Goldman is likely issuing a virtual card for the amount of the purchase.
• While invisible to the user, that virtual card is used to process the transaction and pay the merchant. The transaction generates interchange income, most of which would go to Apple, but some of which, presumably, would get shared to Goldman, Mastercard, and the payment processor.
• Further, because Goldman holds more than $10 billion in assets, it is not exempt from the Durbin Amendment’s cap on debit interchange — meaning the income earned could be lower than if Apple partnered with a smaller bank on the program.
• The average interchange fee of a covered transaction is just $0.23 — about half the average fee of Durbin-exempt debit transactionsTransactions transactions Interactions where value is exchanged for goods or services..
• Apple then collects repayment from the user via their linked debit cardDebit Card debit-card A payment card that deducts money directly from a consumer’s checking account. May also support ATM withdrawals. — and pays processing fees to do so.
• While fraudFraud fraud Criminal deception involving unauthorized payments or use of financial credentials. losses should be significantly lower for Apple Pay Later vs. a standalone BNPL provider, given the authenticationAuthentication authentication A security process used to verify the identity of the user or cardholder. May involve passwords, biometrics, OTPs (one-time passwords), or 3-D Secure. and additional data Apple holds on users, they’re unlikely to be zero.
• Apple will conduct a soft credit check, presumably when users initially enroll in Apple Pay Later. And Apple customers skew higher income and higher credit score than the overall population. But while credit losses are likely to be lower than other BNPL providers, again, they are unlikely to be zero.
• Can Apple make these economics work? With the information we have, it’s impossible to say — hopefully, future disclosures can shed additional light on the interchange revenue, payment processing costs, fraud, and credit losses.
• Even if the unit economics work, it’s unclear how significant the BNPL offering could be in the US market.
• While consumers have certainly shown a willingness to use BNPL, that may not generalize to Apple customers or the UX of how Apple is deploying this — as an extension of Apple Pay, as opposed to integrated in merchants’ shopping experience, as is the common approach of BNPL providers.
• Doing some quick back of envelope math, there are something like 113 million iPhone users in the US. But estimates of the proportion that actually use Apple Pay are as low as 6% in one survey.
• Of the ~7 million US Apple Pay users, how many could be convinced to use the Pay Later functionality?
• Higher earning, higher credit score Apple customers have access to a variety of payment and financing mechanisms — namely, credit cards. Using Apple Pay Later, which can only be linked to a debit card, would mean foregoing credit card rewards points.
• For users who don’t typically carry a credit card balance, convincing them to use Apple Pay Later may be an uphill battle.
• That winnows the population most likely to consider Apple Pay Later to iPhone users, who use Apple Pay, who are willing to trade credit card rewards points for short-term (6 week) financing — neither the largest TAM, nor the most compelling value proposition.
• Still, Apple Pay Later may attract more people to use Apple Pay who previously had not. And it is likely to make those who use it even stickier (and more profitable) users of the overall Apple ecosystem.
• Apple has shown patience in building new business units, like its services and media properties. Surely, Apple Pay Later is but a waypoint on Apple’s larger financial services journey.