Apple is occasionally referred to as a bank disruptor. However, in the realm of financial technology, interactions are far more intricate than that.
Enhancements to Apple Pay, the digital wallet whose size and stature have rapidly risen in recent years, were among the announcements made during the tech company’s most recent product expo. They included a functionality that will let banks offer installment payments for purchases made now and paid for later using cards that are placed into customers’ Apple Pay wallets. According to Apple, the initial deployment would include Citigroup, Synchrony Financial, and Apple Pay issuers in the United States who use Fiserv, a software provider to numerous banks.
Various lenders, including Apple, are offering buy now, pay later options, which pose a challenge to banks’ credit-card businesses. Offering consumers the choice to switch from a credit card purchase to an installment payment plan at the time of purchase is therefore advantageous for banks.
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Additionally, Apple is introducing the option to use card rewards to pay for purchases, giving those points even more value and providing banks with an additional chance to win a transaction. According to Apple, the first participants will be the issuers of Fiserv, Discover Financial Services, and Synchrony.
In an effort to broaden the applicability of Apple Pay, Apple has also decided to allow payments through third-party browsers that require a code that can be scanned with a phone. This means that a card stored in an iPhone digital wallet can also be used to make purchases online.
Due to all of this, credit cards—banks’ mainstay retail product that generates interest on revolving balances and transaction fees—are becoming available for use in a wider range of e-commerce retail sales. This aids banks in competing with new payment methods and maintaining consumer spending growth.
It goes without saying that such goods have a cost. According to a Wall Street Journal article, American banks have agreed to pay Apple 0.15% of credit card purchases made through Apple Pay. It also gives Apple a significant seat at the table with customers and their financial lives, non-financially.
This is the way it works in the “fintech” industry. Not many developments are clear-cut wins or losses for established players or more recent entries. Banks and Apple may decide to part ways. However, banks would fight to encourage customers to use friendly wallets, and Apple would miss out on a lot of transactions.
Particularly smaller banks probably appreciate that their cards may be used in Apple Pay on an equal footing with those of larger banks. In terms of technology, smaller banks frequently trail their larger counterparts.
How customers choose among these possibilities will be intriguing to see. Apple has also announced that U.S. users will be able to apply for loans through purchase now, pay later service Affirm when they pay with Apple Pay. Additionally, Apple will continue to provide its own Apple Pay Later installment option.
Diverse forms can cause disruption. Furthermore, it rarely goes one way.