Shares of Affirm Holdings Inc. and U.S.-listed shares of Afterpay Ltd. slipped in Tuesday trading after Bloomberg News reported that Apple Inc. plans a feature that would let people make purchases in installments, which would put the smartphone giant in direct competition with the buy-now, pay-later providers.
Apple
AAPL,
is working with Goldman Sachs Group Inc.
GS,
on a function that would allow people to split purchases either in four interest-free chunks, payable every two weeks, or over a larger span with interest, according to the report. Apple already works with Goldman Sachs on its credit card, but the installment feature will reportedly be available even for those Apple users who don’t have the company’s card.
Shares of Affirm
AFRM,
dropped more than 10% in Tuesday trading, while U.S.-listed shares of Afterpay
AFTPY,
APT,
which is based in Australia, were off more than 7%. Both companies are established providers of buy-now pay-later (BNPL) offerings that let people pay for goods and services over time.
Mizuho analyst Dan Dolev called the “knee-jerk” reaction in Affirm shares “overblown” following the report.
“Worries about new entrants hurting the payments ecosystem have risen in the past, but ended up being less impactful than initially thought,” he wrote in a note to clients. When Apple announced its online checkout button, there was concern that this competition would hurt PayPal Holdings Inc.
PYPL,
but PayPal “has only thrived” since then, he continued.
The BNPL trend is more popular in markets like Europe and Australia, but it’s gaining steam in the U.S. as younger users seek and alternative to traditional credit. BNPL providers generally claim that their products offer more transparent terms than credit-card companies do. Their services can include interest-free offerings and those with simple interest.
The buy now, pay later wave: Klarna, Affirm and rivals hope to take U.S. by storm
Affirm is expected to have generated revenue of $829 million for its fiscal year that ended in June, according to FactSet, while Afterpay is expected to have raked in $691 million.
Privately held Klarna is another major provider of BNPL services, and PayPal offers a “pay-in-four” product among its various payment options. PayPal shares were down as much as 1.4% in Tuesday trading but ended the day off 0.6%.
The Bloomberg story, which cited multiple unnamed sources, noted that Apple’s plans are still in development and could change. Apple didn’t immediately respond to MarketWatch’s request for comment. A Goldman Sachs spokesperson also didn’t immediately respond.