Tim Cook has crossed the banking divide. Big U.S. tech firms have so far largely kept out of the lending business. But on Monday Apple’s chief executive unveiled plans to use the $2.4 trillion company’s balance sheet to offer “buy now, pay later” loans to iPhone users. The push into financial services will keep traditional banks on their toes.
Apple on June 6 announced a “buy now, pay later” service, offering to split purchases into four equal payments over six weeks. The tech giant plans to fund the loans off its corporate balance sheet.
Apple said its treasury department will decide the exact mechanism it will use to fund the loans and funding sources may shift over time. Decisions about loans and the creditworthiness of borrowers will be handled by a wholly owned subsidiary, Apple Financing. Apple’s pay-later loans will have zero interest and no fees of any kind. To judge creditworthiness, Apple said it plans to use consumers’ credit and other data, such as their purchase and payment history with Apple in both its stores and online services such as the App Store.
To use the pay-later service, Apple customers will have to connect a debit card to their Apple Pay account to fund repayment of the loans. A quarter of the purchase price for approved loans will be due at the time of purchase, and, like other debit card transactions, Apple will run an instant check to ensure the buyer has sufficient funds to cover the upfront payment.
Apple will offer the loans anywhere that accepts Apple Pay, both online and in physical retail stores. The payments to merchants will be made over the Mastercard network using payment credentials issued by Goldman Sachs, Apple said.Editing by Peter Thal Larsen, Streisand Neto and Oliver Taslic
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