April 24, 2024

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Apple Pay Later
Courtesy: Apple Inc.

Apple is turning into a fintech company.

The company announced several new features for the iPhone’s Wallet app at its developers conference Monday that directly compete with products from other fintech companies such as Affirm and PayPal. The big one: a buy now, pay later service called Apple Pay Later. That announcement sent Affirm shares down more than 5% Monday, and they were down an additional 4% as of Tuesday morning.

Apple will also launch a new payments system later this month that lets you pay someone by tapping your iPhone against theirs. It’s a direct competitor to Block‘s Square. And Wallet in iOS 16 will let you track online orders you buy through Apple Pay.

All of this points to one of the most interesting corners of the Apple ecosystem — a growing suite of financial products within the Wallet app. Many of these features aren’t designed to make money for Apple directly, but they do make Apple Pay more attractive for people who haven’t tried it yet. (Apple takes a tiny percentage of every Apple Pay transaction, so the more people using it, the better it is for Apple.) Like most major new iOS features, it’s also another mechanism to keep customers locked into Apple’s ecosystem and upgrading to a new iPhone when they’re ready.

But Apple’s new Wallet features are also coming at a time of great economic uncertainty. Inflation is still going wild. Gas prices continue to hit record highs. And there are plenty of very real fears about an upcoming recession. It could be a tough time for Apple to launch a new product designed to get people to buy more stuff if those trends persist throughout the year.

Apple’s new rivals in the buy now, pay later space have struggled in recent months as consumer spending shifts from goods to services. Other fintech and crypto companies such as Robinhood, PayPal and Coinbase have struggled this year as well.

Apple has a longer-term vision for Wallet. As the company revealed the latest features Monday, executives said the ultimate goal is for the digital Wallet app to replace everything in your physical wallet.

But things are moving slowly in some areas, such as last year’s feature that lets you add your driver’s license, which is available in just a couple of states in the U.S., and with a few more expected soon. Even then, you can use the ID only at TSA checkpoints at one airport in Phoenix. Carmakers have also been slow to adopt the iOS feature that lets you store a digital version of your car key on your phone.

Still, Apple told me yesterday there’s little concern over that slow adoption. The hope is consumer demand pushes third parties to adopt the technology.

On the fintech side, however, Apple is building a foundation to provide a boost to its payments business by layering more functions into Apply Pay and Wallet beyond just using your iPhone, instead of your credit card, to pay for things. And because of Apple’s scale with more than a billion devices in use, a lot more people are about to be exposed to these products.