Affirm, the largest independent BNPL provider in the U.S., offers consumers both interest-bearing loans paid off over a period of months, as well as interest-free loans paid off over weeks. The former type of loan makes up the majority of Affirm's gross merchandise volume.

Apple’s BNPL service, initially rolled out in March, enables consumers to pay for purchases in four installments over six weeks after they’ve applied for a loan through the tech behemoth’s digital wallet. Customers can access loans between $50 and $1,000. The loans must be tied to a debit card, not a credit card, and Apple said it won’t charge fees or interest.

In brushing off the competitive threat Apple poses to Affirm, Levchin touted Affirm’s integrations with e-commerce platforms Amazon and Shopify and major retailers Walmart and Target. 

The competitive landscape in BNPL is always changing, though: Walmart-backed fintech One is reportedly launching a buy now, pay later offering, and Affirm’s exclusivity with Amazon ended Jan. 31, although Affirm continues to be a payment option on that e-commerce site.

Affirm’s stock price on March 28 – the day Apple announced it was beginning to roll out the BNPL service – dipped to under $10 per share. Still, Levchin maintained the arrival of Apple Pay Later isn’t “quite as impactful as the stock price that day may have implied.”

Apple’s move into BNPL could present a meaningful threat to the likes of PayPal, Levchin said. With PayPal being an unintegrated mobile wallet compared to Apple’s hardware-integrated wallet, “there’s obvious pressure,” Levchin said. Levchin was one of the cofounders of digital payments pioneer PayPal. 

For its part, Affirm has been focused on its debit card strategy as part of an effort to gain wallet share and capture in-store, everyday spending.  

Levchin also took note of Apple’s choice, like Affirm, to skip late fees with its BNPL service. “The fact that Apple showed up to the party and said, ‘Us too, we’re also going to do no late fees’ is very powerful,” Levchin said. 

That move on the part of the tech behemoth could put pressure on BNPL rivals such as Klarna and Afterpay, who do impose late fees, Levchin speculated. Those competitors may be re-evaluating their dependence on late fees if the alternative isn’t just Affirm, “it’s also the guy with the integrated hardware wallet,” Levchin said. “Pricing pressure is going to be put on primarily our competitors.”

The Consumer Financial Protection Bureau recently attacked credit card late fees, proposing to cap those at $8 per payment. In the U.S., Block-owned Afterpay says its late fees are capped at 25% of the order value; Sweden-based Klarna also caps the “aggregate sum” of a U.S. customer’s late fees at 25% of the order value. 

Levchin also said Apple’s entrance into the market underscores the notion that BNPL isn’t a passing fad. Apple “does not do things as a flash in the pan modality,” he said.

By Caitlin Mullen on May 25, 2023
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