Shares within the “Buy Now, Pay Later” (BNPL) space tumbled on Tuesday (July 13) as Bloomberg broke news of Apple’s plan to offer a competing product: Apple Pay Later. On the news of Apple’s offering, the share prices of two of the leading BNPL providers, Affirm (NASDAQ: AFRM) and Afterpay(OTCMKTS: AFTPY), fell 10% and 7%, respectively. The announcement was another hit to the BNPL specialists as competition from large scale technology players and institutional banks heightens. At the time of this writing, Affirm’s share price is down 59% from its February 11th high, with Apple’s announcement being merely one factor at play.
BNPL has been one of the fastest-growing payments trends globally as both young shoppers and older individuals push for more flexible payment options. From 2018 to 2020, BNPL established popularity in Europe, North America, and Australia, where transaction volume increased at an annual rate of 98%. The secular growth is continuing to attract many large banks and technology firms that are looking to capture market share as demands shift. The phenomenon is currently playing out in Australia, where PayPal announced its plan to stop charging late fees. If PayPal’s decision translates to the rest of the industry, the move may be costly to Affirm, which generates 14% of its revenue from payment delinquencies.
Apple’s entrance into the BNPL space exemplifies the tech giant’s most recent focus on diversifying its product offerings. The company’s strategy surrounding innovation is supported by its almost $19 billion R&D spend from 2020, which increased $2 billion from the preceding year. The announcement of its BNPL offering increases the host of payment oriented products available to Apple customers and continues their partnership with Goldman Sachs. Furthermore, the new offerings show the tech giant’s quest to compete with Google, PayPal, and Square in the realm of payments.
There has yet to be a consensus on how Apple’s new offering will disrupt the disruptors; however, it is likely to solidify BNPL’s status as a “feature, not a product”. With $90 billion of cash-on-hand and global branding that rivals a cultish fervor, Apple’s efforts are all but certain to change the way we think of the BNPL proposition.