Apple is sometimes called a disrupter to banks. But relationships in financial technology are much more complicated than that.
Announcements out of the tech company’s latest product showcase included enhancements to Apple Pay, the digital wallet whose size and stature has rapidly expanded in recent years. They included a feature that will enable banks to offer buy now, pay later installment payments via their cards loaded into users’ Apple Pay wallets. In the U.S., Citigroup, Synchrony Financial and Apple Pay issuers using Fiserv, a software provider to many banks, will be part of the initial rollout, Apple said.
One of the threats to banks’ credit-card businesses are buy now, pay later options offered by other lenders, including Apple itself. So for banks, it is a win to be able to offer customers the option to convert a card purchase into an installment-payment option right at the point of purchase.
Apple also is introducing the ability to pay for a purchase with card rewards, adding that much more value to those points, and giving banks another opportunity to win a transaction. Discover Financial Services, Synchrony and Fiserv’s issuers will be the initial participants, Apple said.
To further expand Apple Pay’s reach, Apple also will enable payments via third-party browsers with a code that can be scanned with a phone—meaning that a card in a user’s iPhone digital wallet can effectively make payments across the web, too.
All of this continues to bring the credit card—banks’ bread-and-butter retail product, generating transaction fees and interest on revolving balances—to more forms of e-commerce retail sale. This helps banks keep their customer spending growing and compete with upstart payment types.
Of course, there is a price for things like this. The Wall Street Journal has reported that banks in the U.S. agreed to pay Apple 0.15% of a purchase made with a credit card via Apple Pay. And non-monetarily, it gives Apple a big seat at the table with customers and their financial lives.
This is how things go in the world of “fintech.” Few developments are a straightforward win or loss for traditional players or newer entrants. Apple and banks could go their separate ways. But then Apple would lose out on many transactions, and banks would battle to push people toward friendly wallets.
Smaller banks in particular likely value the ability for their cards to be on the same playing field as the big banks’ cards in Apple Pay. Smaller banks are often at a tech disadvantage to their giant peers.
It will be interesting to see how consumers sort out these options. Apple will also continue to have its own Apple Pay Later installment option, and it announced that U.S. users will be able to apply for loans through buy now, pay later provider Affirm when they pay with Apple Pay.
Disruption comes in many forms. And it is rarely a one-way street.
