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Apple (AAPL) Relies on Subsidiary to Manage Apple Pay Later
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Apple (AAPL - Free Report) will use its subsidiary, Apple Financing LLC, to manage the Apple Pay Later service, which was announced as part of iOS16 at this year’s Worldwide Developers Conference (“WWDC”). The latest move reflects Apple’s strategy of handling fintech operations on its own instead of relying on third parties.
Apple’s financial offerings like Apple Card credit card and Apple Cash rely on Goldman Sachs (GS - Free Report) for loan decisions and creditworthiness. As per the latest move, the wholly-owned subsidiary will handle loans and creditworthiness while Apple will fund the loans off its own balance sheet.
This is rather unsurprising, given the small loan amount and short tenure. Apple Pay Later splits a purchase into four equal installments to be paid over six weeks. Based on its strong balance sheet and liquidity position, it should be a cakewalk for Apple to fund these loans.
As of Mar 22, 2022, Apple had cash & marketable securities of $192.73 billion on its balance sheet against term debt of $112.98 billion.
However, per a 9TO5 Report, Apple partners, Goldman Sachs and Mastercard (MA - Free Report) , will still play a small role in the Apple Pay Later service, as the iPhone-maker doesn’t have a bank charter.
The new service will be available to users in the United States and everywhere Apple Pay is accepted online or in-app, using the Mastercard network. Apple will charge consumers zero interest and no fees of any kind.
Apple Pay Later to Boost Apple Pay User Base
Undoubtedly, Apple Pay Later was the most eye-catching announcement at WWDC22. Through this new offering, the iPhone-maker is set to enter the Buy Now Pay Later (“BNPL”) market currently dominated by offerings from companies like Affirm (AFRM - Free Report) , Paypal and Block.
The global BNPL market is expected to witness a CAGR of 21.7% during the 2022-2029 time frame to reach $90.51 billion, according to a latest report by Fortune Business Insights. This presents solid growth opportunity for market participants. Given Apple’s record of disrupting markets, these fintech companies are expected to face significant heat with the launch of the new service.
However, Affirm CEO believes Apple Pay Later is not a threat to its service as Affirm offers more extensive and longer-term plans. Affirm has more than 12.7 million customers and extended around $3.9 billion in loans in the first three months of 2022. The company’s shares have fallen roughly 7% to-date this week following Apple’s announcement on Jun 6.
Apple Pay Later will definitely boost Apple Pay’s user base, thereby eventually driving Services revenues. The Services portfolio has emerged as Apple’s new cash cow. This Zacks Rank #3 (Hold) company had more than 825 million paid subscribers across its Services portfolio at the end of fiscal second quarter. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
Growing adoption of services like Apple Pay, Apple TV+, Apple Arcade, Apple News+, Apple Card and Apple Fitness+ drives Services' revenue growth, which is expected to be in strong double digits for the June quarter.
In the second quarter of fiscal 2022, Apple’s Services revenues grew 17.3% from the year-ago quarter to $19.82 billion and accounted for 20.4% of sales.
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Apple (AAPL) Relies on Subsidiary to Manage Apple Pay Later
Apple (AAPL - Free Report) will use its subsidiary, Apple Financing LLC, to manage the Apple Pay Later service, which was announced as part of iOS16 at this year’s Worldwide Developers Conference (“WWDC”). The latest move reflects Apple’s strategy of handling fintech operations on its own instead of relying on third parties.
Apple’s financial offerings like Apple Card credit card and Apple Cash rely on Goldman Sachs (GS - Free Report) for loan decisions and creditworthiness. As per the latest move, the wholly-owned subsidiary will handle loans and creditworthiness while Apple will fund the loans off its own balance sheet.
This is rather unsurprising, given the small loan amount and short tenure. Apple Pay Later splits a purchase into four equal installments to be paid over six weeks. Based on its strong balance sheet and liquidity position, it should be a cakewalk for Apple to fund these loans.
As of Mar 22, 2022, Apple had cash & marketable securities of $192.73 billion on its balance sheet against term debt of $112.98 billion.
However, per a 9TO5 Report, Apple partners, Goldman Sachs and Mastercard (MA - Free Report) , will still play a small role in the Apple Pay Later service, as the iPhone-maker doesn’t have a bank charter.
Apple Inc. Price and Consensus
Apple Inc. price-consensus-chart | Apple Inc. Quote
The new service will be available to users in the United States and everywhere Apple Pay is accepted online or in-app, using the Mastercard network. Apple will charge consumers zero interest and no fees of any kind.
Apple Pay Later to Boost Apple Pay User Base
Undoubtedly, Apple Pay Later was the most eye-catching announcement at WWDC22. Through this new offering, the iPhone-maker is set to enter the Buy Now Pay Later (“BNPL”) market currently dominated by offerings from companies like Affirm (AFRM - Free Report) , Paypal and Block.
The global BNPL market is expected to witness a CAGR of 21.7% during the 2022-2029 time frame to reach $90.51 billion, according to a latest report by Fortune Business Insights. This presents solid growth opportunity for market participants. Given Apple’s record of disrupting markets, these fintech companies are expected to face significant heat with the launch of the new service.
However, Affirm CEO believes Apple Pay Later is not a threat to its service as Affirm offers more extensive and longer-term plans. Affirm has more than 12.7 million customers and extended around $3.9 billion in loans in the first three months of 2022. The company’s shares have fallen roughly 7% to-date this week following Apple’s announcement on Jun 6.
Apple Pay Later will definitely boost Apple Pay’s user base, thereby eventually driving Services revenues. The Services portfolio has emerged as Apple’s new cash cow. This Zacks Rank #3 (Hold) company had more than 825 million paid subscribers across its Services portfolio at the end of fiscal second quarter. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
Growing adoption of services like Apple Pay, Apple TV+, Apple Arcade, Apple News+, Apple Card and Apple Fitness+ drives Services' revenue growth, which is expected to be in strong double digits for the June quarter.
In the second quarter of fiscal 2022, Apple’s Services revenues grew 17.3% from the year-ago quarter to $19.82 billion and accounted for 20.4% of sales.