Another day, Another Apple post (after the Apple going to Vietnam post yesterday). No “an apple a day” jokes, please.
Anyway, I just came across a post on Bloomberg, on how Apple is starting its own payment service. Bloomberg reports…
Apple Inc. will handle the lending itself for a new “buy now, pay later” offering, sidestepping partners as the tech giant pushes deeper into the financial services industry.
Apple will run its lending service through its own subsidiary, Apple Financing LLC, which will remain at an arm’s length from its main business. To be precise, Apple’s BNPL (buy now, pay later) plan and its financial foray is not a new step. Apple already works with Goldman Sachs for its credit card. However, according to CNBC, for the BNPL plan, Apple will run soft credit checks when a person applies for its BNPL service, loaning them up to $1000. Apparently will tighten credit to those who miss payments. That looks like a bank loan service to me.
Yet, Apple is still not a bank as of now (some definitional charter thingies are missing). It is however increasingly a service company.
At the beginning of the pandemic in the US, in May 2020, I wrote about Apple services plan in a post titled
Apple: A Services Company
I wrote:
I have only occasionally written about Apple on this blog, but I wrote last year while discussing Peak iPhone (and a follow up with more evidence) that iPhone as a product is maturing and argued that eventually, Apple will become a services company.
At that point, Services had already accounted for >20% of their revenues — in fact, quite a bit more than Mac and iPad combined (9% and 7%). The pivot to services truly happened at the end of 2019. Services have steadily remained a sizeable proportion of their revenues since 2019.
People are talking about their payment processing services and their Breakout plans. I don’t have a cleverly formulated view of their plans yet.
Nevertheless, Apple’s move is a curious case of product-service being bundled and taken in-house. As customer analytics expands, we will see a reversal of the old business process when it was common for ancillary services to be unbundled, spun out, and outsourced to third-party companies. (Think of car loans with servicing handled by the banks for car companies).
Now all such customer relationship is not a low-margin “hassle” but a key to understanding their lifetime value. In fact, I expect more such processes will go in-house across many firms, as companies like Apple try to understand the position of the customer in their product-service ecosystem.