Apple has decided to discontinue its buy now, pay later (BNPL) service, Apple Pay Later, which was launched in the US in October 2023.

This move comes in anticipation of regulatory changes and the company’s strategic shift to new types of installment loans globally.

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Apple Pay Later faced persistent regulatory scrutiny

Despite initial expectations of success, Apple Pay Later faced persistent regulatory scrutiny, particularly from the US Consumer Financial Protection Bureau (CFPB), which has been closely examining the BNPL sector. Apple’s decision to terminate the service is a direct response to the evolving regulatory landscape. Apple is pivoting to a model that offers installment loans through Apple Pay, partnering with credit card companies, banks, and lenders.

The CFPB has been actively investigating the BNPL sector as a result of concerns over consumer risks such as data privacy and excessive debt. Persistent complaints from BNPL customers about refunds and disputed transactions have been a significant factor in regulatory scrutiny, prompting Apple to assure users of its commitment to safety and privacy.

The CFPB’s inquiry into BNPL services and the subsequent May 2024 interpretive rules that mandate key consumer protections akin to those for credit card users, has increased the compliance burden for BNPL providers. By discontinuing Apple Pay Later, Apple is strategically avoiding pending regulatory requirements that could impose additional obligations on BNPL lenders, such as investigating disputes and issuing refunds. The discontinuation of the service in the US will require Apple to communicate effectively with active Apple Pay Later users to maintain customer satisfaction by ensuring a smooth transition to the new Apple Pay installment loan services.

New loan installment service

Apple’s reach into financial services mirrors a wider trend of big tech companies like Amazon, Meta, Google, and Uber offering fintech options of their own. Apple’s new installment loan feature will be available in more countries than the previous service, starting with the UK in partnership with HSBC and Monzo. In the US, it will be supported by Citi, Synchrony, and lenders using Fiserv software, and Apple users will have the option to apply for loans through Affirm at the point of sale with Apple Pay.

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By integrating installment loans into Apple Pay, the company is positioning itself to cater to a broader audience, potentially increasing its user base and transaction volumes. The new service also aims to provide greater flexibility in payment methods, leading to increased consumer spending and loyalty.

Apple’s new service is a valuable customer retention tool as users will be less likely to exit an ecosystem, which aids them in getting and paying off loans. By transitioning to a model that offers installment loans through Apple Pay in partnership with established financial institutions, Apple aims to sidestep the regulatory challenges associated with BNPL services while expanding its fintech offerings and maintaining customer loyalty within the Apple iOS ecosystem.