How Apple will make money with Apple Pay Later, which finances purchases at 0% interest

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Among all that was presented during the WWDC 22 which took place last Monday, one of the most interesting announcements was the new funding offered by Apple ‘Apple Pay Later’.

He is new mode of financing proposed by Apple aroused the curiosity of many users, but it also did so among financial experts and analysts who explain how Apple will earn something if the purchases are made without interest.

Apple Pay Later is a new system for users to purchase a product or service and have the ability to pay it in 6 monthly installments without generating interest.

In addition, Apple Pay Later is designed to work with the Wallet app, allowing users to view and manage their payments and purchases available at all establishments that allow the use of Apple Pay. Sounds good, doesn’t it?

Earnings from Apple Pay Later

Everything indicates that we are facing one of the funding models most striking today, but if it’s so good for customers, what does it benefit the company granting it?

Rajat Roy, associate professor at the business school presented an interview for The Conversation in which he explains how this financing plan would lead Apple to make more money than expected thanks to three key points that will be generated with Apple Pay Later.

Stores and their availability

Apple Pay Later will be a recurring payment method and requested by millions of customers. This will put merchants and vendors in a position to allow Apple to negotiate pricing for the service to make it available in the thousands of places that want it. This is how Apple thinks it gets minimal profits, but in the end it’s profits.

“Apple is trying to consolidate its foothold in the world of consumer credit and increase its profitability […]

As Apple customers start using Pay Later more and more, you’ll benefit from merchant fees. These are fees that retailers pay Apple in exchange for being able to offer Apple Pay customers.”

consumption data

With Apple Pay Later another method is open for knowledge of consumer spendinga gap that helps identify buying habits and other aspects that would impact new strategies that allow him to recognize and explore new avenues in the market.

“Apple will also gain valuable insights into consumer buying behaviors, which will allow the company to predict future consumption and spending behavior.”

Penalties

The millions of Apple users could consider this novelty as an easier and more comfortable method of acquisition. However, it can turn untenable to the customer.

“Young people (like Gen Z and Millennials) and low-income households may be more vulnerable to the risks associated with using these services and may accumulate debt as a result.”

Thus, although Apple offers a payment limit to be able to make the payment. This new financing is very short-lived, so customers commit to making payments on purchases that can spiral out of control and start putting them in debt. And like all credit, by not making payments there are penaltieswhich are sure profits for the company, but a big problem for the debtor.

Beware of Apple Pay Later

Finally, Roy goes deeper into his debts and recognizes the risk of unsustainable spending that Apple Pay Later can create.

And it is that financing so easy to obtain can generate an excessive and unconscious buying habit in the customer which will initially lead to a bad credit rating and later to indebtedness.

“Purchases through buy-it-now, pay-later programs can also be driven by a desire to own the latest gadgets and luxury goods, a message conveyed to consumers through skillful marketing. They can condition consumers to shop without feeling the pain of parting with cold, hard money.

From a consumer psychology perspective, these services encourage immediate gratification and put young people on the consumption treadmill. In other words, they may continually spend more money on purchases than they can actually afford.”

The bitten apple company announced iOS 16 without mentioning a few secrets, and also put this new funding on the table as a unique utility to be an Apple customerbut Rataj came out to explain that there is an underlying profit flow to this tactic.

In addition, the teacher warned against risks that exist with Apple Pay Later, but what do you think? Will it be a win-win or is it an untested signal advantage?

Related Topics: Pay Apple

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