Apple’s progress in financial services is not surprising

So why is the hardware and software provider moving to the buy now, pay later (BNPL) market? The iPhone is currently Apple’s main driver of growth in sales, earnings, and stock price, and it doesn’t look like that’s going to change anytime soon. This was the main reason the Cupertino operation became the first $1 trillion company in history and its consistent approach to annual smartphone updates continues to work with consumers.

However, the biggest source of growth for Apple over the past five years has been from the services division. This includes the App Store and Apple Music but also includes AppleCare, Apple Pay, iCloud storage services, AppleCare warranties, subscriptions, and an Apple Card. The latter was formed as a result of partnering with an existing bank, Goldman Sachs, and Consolidated Financial Services in order to dip its toes into the market, but it was a bit surprising not to see more direct competition yet.

As a technology leader, I read with interest earlier in the year a report in Bloomberg that Apple was “evolving its payment processing technology and infrastructure for future financial products, as part of an ambitious effort that will reduce its dependence on third-party partners over time, According to people familiar with the matter… this includes payment processing, lending risk assessment, fraud analysis, credit checking, and additional customer service functions such as dispute handling.”

Apple later bought startups Credit Kudos and Mobeewave which will enable the company to turn iPhones into payment terminals. And now comes the news about the entry of “buy now, pay later”.

It’s no surprise that Apple Pay Later is rolling out first in the US. You will work with files The Mastercard network and will be integrated into Apple Wallet. It will allow Apple iPhone and Mac users to fund the purchase in four installments over six weeks, without interest, at any online location that actually supports Apple Pay.

As a side step, this is happening at an interesting stage in the development of BNPL in the UK. Klarna, the UK’s leading provider, Sharing customer data with credit reference companies Experian and TransUnion began at the beginning of this month. This means that credit card companies will be able to see transactions and debt when they perform formal checks on potential borrowers.

Apple has not commented on whether it has plans to enter the UK market but it is a developing market in that country. Klarna says it has 16 million active users in the UK which it believes will certainly appeal to Apple, which has a habit of rolling out new services in the UK once it expands outside the US.

What is remarkable, however, according to anotherBloombergThe report, is that Apple will handle BNPL lending in the US on its own without a partner bank, opting to use its Apple Financing LLC for credit screening and loan decisions. Could this mean that Apple is using BNPL as a first stage in a much broader lending scheme?

axial antecedent

For those skeptics who doubt that the industry giant can play a successful pivotal role in financial services, mentions General Electric (GE). Originally a manufacturing company set up by Thomas Edison, GE moved into financial services with the creation of GE Capital as a way to provide credit to help purchase its products. Before its CEO decided in 2014 to divest most of its financial services business, GE Capital had more than 35,000 employees worldwide, operating in more than 40 countries, with total assets of $499 billion.

Now, there are many lessons to be learned from GE Capital’s financial services failures – notably its vulnerability to self-lending when the credit crunch hit – but they show that a huge, profitable company can transition into financial services and take over successfully. monolithic organizations.

It makes perfect sense for Apple to expand with its current presence in financial services with Apple Card and Apple Pay. It is a trusted player in finance and its brand is the most valuable in the world. The real question should be whether this is the limit to Apple’s aspirations in financial services or just the beginning?

Mark Lusted is the CEO of MagiClick UK

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