Apple is the newest entrant to the buy-now-pay-later market, but it already holds a lot of information about how its customers spend their money.
Tim Cook, the CEO of Apple, announced on Monday that Apple Pay would be available on Apple Wallets in the US. The idea of overnight, buy now, pay later, which allows users to spread out payments for large purchases over several periods, was a buzzy idea.
Apple Financing Inc., the company's new subsidiary, will bring credit checks on new users and loan decisions in-house, as well as offering the service on the Wallet App, according to the report.
The CEO of Apple's new rival, buy-now-pay-later startup Affirm, applauded the move as a way of bringing the practice into the mainstream.
Last month, the darling of Europe's fintech scene, Klarna, laid off 10% of its staff. If the pricetag can be broken into smaller payments, consumers will be more willing to add more to their carts.
It isn't good news for the consumer. Nadine Chabrier is a senior counsel at the Center for Responsible Lending and she is raising alarm bells. Chabrier warned that Apple could use the huge amount of data it has to engage in microtargeted advertising.
Apple didn't reply to the request for comment. Apple Pay Later promised to do credit checks on consumers to make sure they would be able to repay loans and not charge late fees.
Chabrier is worried about Apple's ability to conduct snooping. It uses the data it has to direct customers to products similar to those they've bought before or that could be potentially attractive based on the user's data profile.
Apple has a lot of data on every person who has an Apple device, and they could use that to increase spending through Buy Now, Pay Later." Chabrier said that people aren't really aware of that and it can be a really bad way to increase spending.
Regulators have begun to pay attention to the risks. In December, the U.S. Consumer Financial Protection Bureau launched a probe into buy-now-pay-later apps. Buy-now-pay-later lenders market to merchants by increasing the cart size. Chabrier said that Apple would be able to dramatically increase spending if it used the data it has.
Regulation over both buy-now-pay-later services and data monetization is more urgent than ever.
Many Americans who live paycheck to paycheck use the service for essential spending because buy-now-pay-later is usually used for the rare expensive purchase of a concert ticket or a new laptop.
Pay later is becoming more popular. It is expected to make up 12% of all purchases in three years.
According to an SFGATE report, Generation Z consumers have racked up debt through such services, which enable reckless spending above their means. The marketing strategies of buy-now-pay-later companies are often similar to those of Silicon Valley companies.
Chabrier said that some of the marketing materials he's seen from buy now, pay later are targeted towards younger and younger consumers.
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