Apple is stepping into the "buy now, pay later" industry and these lateral moves epitomize the state of the tech sector today.
For a company known for its dazzling innovation, this doesn’t do much to move the needle, but honestly, it doesn’t really need to recreate the wheel at this point either.
"Buy now, pay later" focuses on the bottom feeder consumer who can’t afford to pay full price for something and must elongate the payment cycle.
These are the people who are high-risk consumers that otherwise wouldn’t be able to buy an iPhone without the subsidy.
The good news is that Apple doesn’t need to innovate to stay on top because many other companies aren’t innovating either. The bar is quite low these days.
I would say that Microsoft is probably the one that takes the lead with its artificial intelligence investments, but the jury is also out on that as well with Italy banning its new service.
Without much innovation going on, Apple is moving onto others' turf and leveraging their whole ecosystem against weaker competition like Affirm Holdings, Inc. (AFRM).
Launching Apple Pay Later, which allows Apple Pay users to split purchases into four interest-free payments paid over six weeks without an additional fee.
Apple conducts a soft credit check, which reviews credit scores to understand one’s current credit.
If approved, the Pay Later option is shown when you use Apple Pay online or make in-app purchases on iPhones and iPads. Purchases using the new service will be authenticated using Face ID, Touch ID, or a passcode.
Aside from Affirm, other competitors include Afterpay, Klarna, and PayPal’s “Pay in 4” option. Here’s how Apple Pay Later compares.
I do believe this is a net positive for Apple even if it does increase the risk of non-performing loans.
Apple would easily be able to absorb these losses if they delivered material harm to the company simply because the balance sheet is so healthy.
Apple has been the recipient of the flight to safety trade along with Microsoft during this technology stock melt up.
The expectation of no more interest rates has been the trigger for new capital allocation into Apple stock.
I fully expect Apple’s stock to perform well during a time when liquidity has been poured into the system by the Fed.
They are doing this because the Fed is prioritizing global systemic banking risk as the number one risk to the market.
This has caused the Fed to rid themselves of quantitative tightening meaning the goalposts have suddenly widened for the tech behemoths and Apple is merely obliging to the easier conditions.
Remember, it is more about conditions in the short term than anything else which is why liquidity is so important to share prices.
Therefore, Apple rolling out a “meh” business like "buy now, pay later," which could possibly turn into a "buy now, pay never" business, is not really a big deal.
Rolling out with essentially the same phone over and over again with different colors also doesn’t matter either.
Conversely, this will do material damage to companies like Affirm, Klarna, Afterpay, and PayPal.
Buy the dip in the best and brightest in tech. Apple is obviously one of those candidates.
