Apple digs into its massive pile of cash to fund new Pay Later service

Apple is making its biggest move into finance by offering loans directly to consumers for its new buy now pay later product, taking on a role in its other lending services by banking partners.

The company said that short-term loans would be made through a wholly owned subsidiary.

Apple Pay Later will be accepted by millions of US retailers that already take the iPhone's mobile and online payments service, giving it a broad reach and an attractive customer base who can already afford a new phone.

After years of an uneasy alliance in areas such as mobile payments, Big Tech is moving into the core banking business. Apple has worked with Goldman to issue a credit card in the US as well as with banks in the UK to offer financing for purchases of its own devices.

The roles of those banks are not as important as they used to be.

Apple doesn't have a license to issue payment credentials directly so Goldman is facilitating Apple Pay Later. Apple's new subsidiary is handling the loans.

Goldman said it was excited about its partnership with Apple.

The set up will allow Apple to earn interchange fees from each transaction as well as give the company more control over data and help accelerate the international expansion of its financial products. Apple has to accept the loss if a customer fails to repay the loan.

Apple has previously rolled out other online services such as Apple Music, iCloud, and TV Plus to dozens of countries simultaneously, but the expansion of its financial services has moved more slowly. Apple Card is only available in the United States.

Apple is able to lend off its own balance sheet, even for short-term loans. The company had net cash of $73 billion at the end of March.

The buy now, pay later service is the latest addition to a growing suite of Apple financial services.

Apple Pay allows the use of credit and debit cards by owners of the Apple Watches. Apple Cash allows users to make peer-to- peer payments.

Apple doesn't see a need for a banking license at the moment.

Many tech companies offer financing to small businesses that sell through their platforms. Apple is planning to extend loans to consumers for general purchases, but few Big Tech groups have done the same.

Apple's premium-priced gadgets tend to have higher incomes than other tech customers, which makes them less of a lending risk. Customer data can be used by Apple to determine if a customer is in good standing.

In order to avoid sharing personal data with third parties, Apple went it alone. The company will not charge late payment fees but will restrict access to short term credit.

Apple bought a UK-based credit card company. Traditional credit scores have been criticized as a way to accurately assess a consumer's finances.

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