Apple will handle loans from its “buy now, pay later” service

Bloomberg — Apple Inc. (AAPL) will handle loans for its new “buy now, pay later” service, Shelving partners at a time when the tech giant is pushing into the financial services sector.

A wholly-owned subsidiary will oversee credit checks and make lending decisions for the service, which is called Apple Pay Later. The company – Apple Financing LLC – has the necessary state lending licenses to offer the feature in the US, although it operates separately from Apple’s parent corporation, according to the company.

It’s the first time Apple has handled key financial tasks like lending, risk management and credit checks. It’s a significant change for a company that started out selling computers. Until now, Apple’s financial services were backed by third-party banks and credit processors. The Apple Card credit card, for example, relies on Goldman Sachs Group Inc. (GS) for loans and credit evaluation.

Goldman Sachs retains a minor role in the new program. The financial firm is the issuer of the Mastercard (MA) payment card used to complete Apple Pay Later purchases.

Apple has been working to move many elements of its financial services in-house as part of a secret initiative called “Breakout,” according to reports. Bloomberg in March.

In addition to handling loans, credit checks and decision-making, Apple is working on its own payment processing engine to eventually replace CoreCard Corp. (CCRD), It is also working on new customer support features, fraud analysis, interest calculation tools, and rewards for other services.

Few companies can compete with Apple’s financial resources. It had almost $200 billion in cash and marketable securities at the end of the last quarter and generated almost $95 billion in profits during the last fiscal year.

Financial services help keep users glued to their iPhones. That’s why the company wants more control over the process, which would allow it to launch new options more quickly and potentially raise more revenue.

Apple Pay Later – unveiled Monday at the company’s Worldwide Developers Conference as part of the iOS 16 operating system – will allow customers to spread the cost of any Apple Pay transaction into four installments over six weeks. The program will initially only be available in the United States, although the company plans to expand its new financial services to more regions.

The company is also working on a longer-term “buy now, pay later” program called Apple Pay Monthly Installments, it has reported. Bloomberg. While Apple Pay Later’s short-term offering doesn’t use Goldman Sachs or other major partners, the long-term plan is likely to rely on other companies — including Goldman Sachs — that may offer different plans and interest rates. In April, Goldman Sachs CEO David Solomon said his company was “very comfortable” with partnering with Apple.

Earlier this year, Apple acquired the British company Credit Kudos Ltd., which uses banking data to make lending decisions. The iPhone manufacturer’s internal risk-assessment engine will take into account consumers’ history as Apple customers, such as whether they’ve regularly paid for purchases or have ever had their credit card linked to iTunes or the App declined. Store, as reported Bloomberg in March.

In addition to the payment service, Apple plans to use its own loans and technologies for an upcoming iPhone hardware subscription program. However, it has no immediate plans to ditch Goldman Sachs for Apple Card or other banking partners for normal Apple Pay transactions.

Apple’s push into the “buy now, pay later” realm is seen as a threat to Affirm Holdings Inc. (AFRM) and Klarna Bank AB, which offer similar services. On Tuesday, Affirm CEO Max Levchin said he’s not worried about Apple’s offer.

“There is a lot of room for growth for everyone involved,” he said.

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