Apple is changing its payments strategy, stepping away from managing balance sheet-based financial products and focusing more on strengthening its iOS ecosystem and proprietary products.
These changes will transform the competitive landscape, benefiting third-party wallets, BNPL providers and merchants, a new report by the Boston Consulting Group (BCG) says.
The report, released in September, explores Apple’s recent fintech announcements and examines their implications for different markets and players. In particular, it highlights the termination of Apple’s buy now, pay later (BNPL) service, Apple Pay Later, the end of the firm’s partnership with Goldman Sachs, and the opening of its near field communication (NFC) chip and secure element application programming interfaces (APIs) to developers in select regions.
These moves are all part of Apple’s strategy to strengthen its ecosystem and avoid direct involvement in financial products that carry significant risk.
Apple’s BNPL Change
Apple discontinued in June 2024 Apple Pay Later, a BNPL solution that allowed users to pay off purchases of as much as US$1,000 over four installments. Instead, the firm has introduced installment payment options via Apple Wallet in partnership with financial institutions such as Synchrony, Citi, and Affirm in the US, and banks like ANZ in Australia and HSBC and Monzo in the UK. These moves marked Apple’s retreat from offering financial services in-house, likely due to the challenges of overseeing balance sheet-based products, opting instead to integrate BNPL services via third-party providers.
BCG predicts that BNPL players will be the biggest winners of the change since integrating into Apple Wallet means they will gain access to a massive customer base. For example, Affirm’s merchant acceptance is projected to grow from about 290,000 to about 10 million, BCG says.
Another major announcement this year was the opening of Apple’s NFC chip in the European Union in compliance with the Digital Markets Act. The firm proactively did so in seven additional countries: the US, Canada, Australia, New Zealand, the UK, Japan and Brazil. The move will allow developers in these markets access to key elements of Apple Wallet’s infrastructure. This will likely foster greater collaboration with third-party financial providers, significantly altering the digital wallet landscape by increasing competition.
According to BCG, leading paytech and e-commerce companies like PayPal, Cash App and Shopify are expected to benefit from the newly democratized NFC landscape. PayPal, a longstanding leader in e-commerce digital wallets, and Cash App, a popular digital wallet service by Block, will have the opportunity to expand its reach in offline transactions.
BCG also expects many merchants to add NFC payment functionality to their proprietary apps and partner with lenders to offer BNPL options within their wallets, enhancing consumer loyalty through in-app reward and personalized offers.
Most large merchants have enabled contactless payments in their stores but have hesitated to integrate payments with their standalone apps, reflecting the need to invest in new acceptance infrastructure such as QR codes at point of sale (POS). However, the ability to drive consumer loyalty through in-app rewards, personalized offers, and seamless checkout experiences will push many retailers to launch digital wallets and integrate NFC payment functionality as these help them drive both increased consumer engagement and operational efficiencies.
Besides benefiting third-party wallets, BNPL players, and merchants, BCG expects Apple’s recent moves to benefit payment networks like Visa and Mastercard. This new landscape will entrench their presence in card payments and set them up to dominate POS installment payments over time, the firm says.
Featured image credit: edited from Apple
