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Monday, April 22, 2024

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Apple Financing: It’s actually happening

This is an opinion post by our Analyst team.

First, let’s have a stream of consciousness from the banking market:

For years now, every technology presentation to the executive team or board of a bank has included some sort of mention of GAFA, NAFA, MAFNA, MAAA — letters equating to something like “Google Alphabet Apple Facebook Meta Amazon Netflix Microsoft” and generally interchangeable.

They’re coming for your customers,” went the phrase.

Your margin is my opportunity,” is a popular quote (the Jeff Bezos-Amazon-will-kill-you line).

Banking is necessary, banks are not,” is nearly always used, usually next to a big black and white photo of a smiling Bill Gates.

Apple is going to kill your bank,” is yet another popular, tired prediction.

Bank executives the world over, especially those outside of the direct gravity of Silicon Valley openly scoffed.

“Tell that to the Central Bank,” they would reply, fully confident in the rock-hard reality that nothing substantial will be changing in their own markets in the foreseeable future. Or, at least, nothing will require the bank CEO to actually do anything dramatic before he or she has moved on from their position in a few years.

Yes the front-end layer could well be dominated by whatever acronym is popular right now and yes, the bankers in America might have to deal with the Googles and Apples, but it’s good luck and who cares for the rest of the world, at the moment.

And while we’re at it, these tech players don’t want to get into the mess of actual banking, right?

Look at the mess. We have to deal with this every day, say the bankers. There is no way these ‘Silicon Valley kids’ are going to want to handle paper-based KYC. They’ll pass all that mess to the banks, anyway. Just exactly as Apple has done with Goldman, Deutsche Bank and so on.


Oh, so Apple are doing it themselves, are they? And those ‘Silicon Valley kids’ aren’t actually all 21-year-old know-nothings. Some of them are very serious, strategically minded executives sitting on a war chest of many, many billions and the technical delivery capacity to achieve whatever they want within months. And an unrivalled direct channel to millions of customers.


OK let’s stop the stream of consciousness and get to the detail:

Apple’s announcement yesterday that they’re launching Apple Pay Later is a stimulating milestone move because it’s the first time we’ve seen the direct mention of this phrase in the app screenshot:

Loans made by Apple Financing LLC

In the past Apple has been the front-end for these kinds of activities. Take Apple’s UK financing activities – they’re nothing to write-home about and the small print shows the actual reality:

Consumer finance on the Apple Online Store is brokered by Apple Retail UK Limited which offers finance from a restricted range of finance providers and Barclays Partner Finance, which is a trading name of Clydesdale Financial Services Limited, a member of the Barclays Group.

The press release goes a bit further:

Apple Pay Later is offered by Apple Financing LLC, a subsidiary of Apple Inc., which is responsible for credit assessment and lending. Apple Financing plans to report Apple Pay Later loans to U.S. credit bureaus starting this fall,5 so they are reflected in users’ overall financial profiles and can help promote responsible lending for both the lender and the borrower.


Some of those guffawing bank executives will be crossing their arms with confidence, excited to see just how Apple deals with all the usual fraud issues along with non-performing loan challenges. Not for nothing do banks have large teams dedicated to dealing with customer correspondence and chasing of payments.

One would imagine, however, that a lot of the modelling has already been done: With millions upon millions of Apple Pay purchase behaviours to analyse, the team at Apple Financing will probably be feeling pretty confident with their ability to manage.

There is no immediate need for the banking industry to respond, unless you’re based in the United States and finding yourself competing in the personal loan space against one of the world’s largest companies. Outside the US, banks will no doubt be watching carefully.

The various futurists who have predicted this move can pat themselves – finally – on the back. Finally, Apple appears to have directly dipped a toe into the financial market with Apple Pay Later.

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