There’s a Privacy Angle on Apple’s Decision to Finance Apple Pay Later on Its Own

Buried at the end of The Financial Times’s report on Apple Pay Later last week (syndicated here at Ars Technica):

Apple said its decision to go it alone was in part taken to avoid sharing personal data with third parties. The company will not charge fees for late payments, in line with Klarna and Affirm, but will restrict access to further short-term credit.

Makes me wonder what Klarna and Affirm et al. are doing with customer data for BNPL purchases. From a Fast Company story on BNPL companies last month:

Until now, the dominant narrative explaining BNPL’s success is that consumers — particularly, younger ones — are hungry for financing options that are less predatory than credit cards with their 15% average APR. But there is more to the story. Due to privacy changes, most notably the tracking restrictions that Apple made available to iPhone users in April 2021, retailers have not been able to target customers through platforms like Meta, which owns Facebook and Instagram, as they had before. Nor can they definitively attribute an e-commerce sale to a digital ad. BNPL companies, thanks to their increasingly robust apps and email lists, can solve both those problems. Moreover, they have an advantage over social media and digital advertising in understanding consumers’ credit, and, by extension, their buying power. Even as they undercut credit cards, BNPL companies are, by design, amplifying consumer spending. Consumers can still get a fair deal with BNPL products, provided they stay within their budgets and pay on time. But they should understand who BNPL companies are actually working for.

Spoiler: the retailers.

In its early days, in the mid-2010s, BNPL had a relatively simple job. By offering to break a purchase into monthly payments at the point of sale, BNPL could reduce cart abandonment, a common problem for larger-ticket items, especially those being sold by startup brands such as Casper Sleep and Peloton. Leading BNPL players claim that they can increase checkout conversion rates by 20% to 30%. “We are in the business of bringing [merchants] new customers, increasing their cart size, increasing their conversion at point of sale,” Affirm cofounder and CEO Max Levchin said last year.

Apple Pay Later appears to simply be in the business of allowing users to split purchases into multiple payments, interest-free, with complete privacy.

Wednesday, 15 June 2022