How Apple Pay Later Will Pressure PayPal, Cash App And Affirm

Apple's new "buy now, pay later" feature didn't have much effect on AAPL stock, but caused PayPal, Square, and Affirm stock to drop.

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May 9, 2023 • 2 min read

Apple (AAPL), in its methodical approach to consumer financing, has made progress with the launch of buy-now-pay later options this week. Investors have taken notice of other BNPL companies, such as PayPal Holdings, Square-parent Block, and Affirm Holdings.

Apple Pay Later, the BNPL service launched by Apple on March 28, was officially launched. Apple Pay users will initially be able to access the feature.

Apple plans to make it available to all users who qualify "in the next few months." PYPL's stock is likely to fall as the BNPL market has already become crowded.

Apple Pay's market share gains have pushed PYPL stock down. Apple Pay Later will also compete with BNPL's features in Square Cash App. Square acquired AfterPay by 2022.

Apple Pay Later allows consumers to split purchases into four equal payments over six weeks, with no interest or fees. You can borrow between $50 and $1,000.

In a note sent to UBS clients, Rayna Kumar stated that PayPal could weather Apple's latest move into consumer finance.

He said that while Apple Pay Later is a great BNPL option, PayPal still has an edge. "PayPal's consumer loan approval rate is superior because it has already collected data from 90% of its BNPL customers who are PayPal customers.

Kumar said: "PayPal's 35 million merchant relationships can be leveraged to promote the BNPL product."

Morgan Stanley, however, reports that Apple can also leverage in-store purchases.

Eugene Simuni of SVB MoffettNathanson said that AFRM stocks have rebounded since the Apple BNPL news.

Simuni stated that the launch of Apple Pay Later was a clear threat to existing BNPL service providers. However, we believe its impact on Affirm’s financial performance will be minimal in the near term. Apple Pay is the U.S.'s second-most popular digital wallet (after PayPal), used by 30% of online shoppers in the U.S. and available on 40% of ecommerce sites.

Apple also offers a credit card, in partnership with Goldman Sachs. Apple Pay Later is a joint venture between Apple and Mastercard (MA).

Macquarie Research analyst Paul Golding stated in a recent report that Cash App’s expanded offerings could give it a boost.

Cash App ecosystem must be the backstop for Block/Afterpay, he said. Apple Wallet is a strong competitor for Afterpay because of its growing popularity, flexibility, and iOS standard.

Apple's rapidly growing service revenue is a positive for AAPL. Apple's stock dropped on March 28th, the day after it announced Apple Pay Later.

AAPL closed at 164.90 today, up 1.5%. AAPL's stock will be up by 26% by 2023.

PYPL has gained 6% while AFRM is up 15%. SQ has gained 9% in the face of pressure from Hindenburg Research, a short seller.

Comparatively, the S&P 500 has gained 7.5%.

Reinhardt Krause is on Twitter @URL. Follow him for the latest updates on 5G wireless technology, artificial intelligence and cybersecurity.