Apple Pay Later is Here to Dominate Buy Now Pay Later Apps

Apple takes another step in its ambitions as a financial services company, and the apps and companies in the BNPL space should be worried

If you were around in the 1980s and 1990s and shopped at department stores, you may have heard the term layaway before. This financial practice originated in the Great Depression as a way for customers to pay for goods in payments before receiving the merchandise. But as credit cards became more common over the years, they replaced the practice for most people. This shift away from layaway did harm one group of people: those with poor credit scores.

In the last decade, a solution for those people has been presented: buy now, pay later (BNPL) apps. Apps such as Klarna and AfterPay have emerged as payment solutions for people who may not want to compromise their credit and purchase in 4 installments. The BNPL market is currently valued at over $140 billion and has been on track to increase through 2026. And while these apps have become normalized with presence in online retailers and physical brick-and-mortar stores, that comfort may be in jeopardy. Apple has emerged as an aspiring financial services company and has introduced a new feature called Apple Pay Later that threatens the viability of all the BNPL apps available today.

Apple Pay is Everywhere

Quite simply, the reason that Apple entering the BNPL space is such a threat is simply one of value and opportunity. If you are a company like Klarna, you need to negotiate your rate with each retailer that you want to be sold in. Additionally, when shopping inside physical retail locations (which still account for over 85% of retail sales in the United States) there is confusion for customers about the process of using a BNPL app instead of a traditional credit card or cash transaction. For example, to do this with Klarna a customer must set up the Klarna app, find the store, and then create a one-time card with the proper amount. This can be a lot of steps that may cause customers to simply not make the purchase.