Apple's methodical move into consumer financing has progressed with the launch this week of buy now, pay later offerings. The move into consumer financing hasn't moved AAPL stock much, but investors took notice in other BNPL players, including PayPal Holdings, Square-parent Block and Affirm Holdings.
The iPhone maker on March 28 officially launched its BNPL offering, called Apple Pay Later. The feature, available to Apple Pay users, will be available initially on an invitation basis.
Apple says it plans to offer it to all eligible users "in the coming months." The BNPL market is already crowded, a bearish signal for PYPL stock.
AAPL Stock: How Apple Pay Later Works
The BNPL move comes amid market share gains for Apple Pay, which has pressured PYPL stock. Apple Pay Later also will compete with BNPL features on Square's Cash App. Square acquired AfterPay in 2022.
Apple Pay Later lets consumers split purchases into four payments spread over six weeks with no interest and no fees. They can borrow anywhere from $50 to $1,000.
At UBS, analyst Rayna Kumar said in a note to clients that PayPal can weather the newest Apple move into consumer financing.
"While Apple Pay Later appears to be a compelling BNPL solution, we think PayPal's offering still holds an advantage," he said. "PayPal has a superior consumer loan approval rate because it already has data on 90%-plus of its BNPL users that are existing PayPal customers."
Threat To All BNPL Providers
Kumar added: "PayPal can leverage its large network of 35 million merchant relationships to promote its BNPL product."
However, a Morgan Stanley reports that Apple also can leverage in-store shopping.
Eugene Simuni, analyst at SVB MoffettNathanson, said in a report that AFRM stock has rebounded after selling off on the Apple BNPL announcement.
"The launch of Apple Pay Later is a clear competitive threat to all existing BNPL providers, but we expect the impact on Affirm's near-term financial performance to be limited, Simuni said. "Apple Pay is the second most popular digital wallet in the U.S. (after PayPal), utilized by 30% of the U.S. online shoppers and present on 40% of e-commerce sites."
Mastercard A BNPL Partner
The iPhone maker also offers its own credit card in collaboration with Goldman Sachs. For Apple Pay Later, Apple has teamed with Mastercard.
At Macquarie Research, analyst Paul Golding said in a report that Cash App's broader offerings could provide a boost.
"Block/Afterpay have a worthy adversary, so Cash App ecosystem will have to be the backstop," he said. "The growing ubiquity of Apple Pay, the flexibility of the Mastercard BNPL credential, and the iOS-standard nature of Apple Wallet in the U.S. likely make this a strong competitor to Afterpay."
Bright Spot For AAPL Stock
Apple's fast-growing service revenue has been a bright spot for AAPL stock. Apple stock dipped on March 28, the day it unveiled Apple Pay Later.
AAPL stock rose 1.5% to close at 164.90 on the stock market today. With the gain, AAPL stock is up 26% in 2023.
PYPL stock has gained 6% in 2023 while AFRM stock is up 15%. SQ stock has advanced 9% amid pressure from short seller Hindenburg Research.
The S&P 500, in comparison, has gained 7.5%.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.