Apple to handle lending itself with new pay later service

Apple to handle lending itself with new pay later service

Bloomberg: Apple Inc will handle the lending itself for a new “buy now, pay later” offering, sidestepping partners as the tech giant pushes deeper into the financial services industry.

A wholly owned subsidiary will oversee credit checks and make decisions on loans for the service, which is called Apple Pay Later. The business — Apple Financing LLC — has necessary state lending licenses to offer the feature, though it operates separately from the main Apple corporation, the company said in response to Bloomberg questions.

The move marks the first time Apple is handling key financial tasks like loans, risk management and credit assessments. It’s a significant shift for a company that got its start selling computers. Until now, Apple’s financial services have been backed by third-party credit processors and banks. The Apple Card credit card, for instance, relies on Goldman Sachs Group Inc. for lending and credit assessment.

Goldman Sachs retains a smaller role in the new program. The financial firm is the issuer of the Mastercard payment credential that’s used to complete Apple Pay Later purchases. Apple Financing doesn’t have its own bank charter.

Apple has been working to move many elements of its financial services in-house as part of a secret initiative dubbed “Breakout.” In addition to taking on lending, credit checks and decision-making, Apple is working on its own payment processing engine that may eventually replace CoreCard Corp., Bloomberg reported in March. It’s also working on new customer-service functions, fraud analysis, tools for calculating interest and rewards for other services.

Few companies can match Apple’s financial resources. It had nearly $200 billion in cash and marketable securities at the end of the last quarter and generated almost $95 billion in profit during the latest fiscal year. Still, Apple wouldn’t be taking on much risk with the latest effort: Apple Pay Later transactions will be capped depending on a user’s credit history.