Some 43 percent of Americans have used a buy now, pay later (BNPL) service this year, according to Lending Tree. That’s an increase from 31 percent in 2021. Now Apple is looking to capitalize on the market’s growth. 

BNPL is a retail payment option that allows consumers to split a purchase into smaller installments; most services are interest- and fee-free – as long as payments are made on time. 

Apple, which already has Apple Pay and a credit card it launched three years ago with Goldman Sachs Group Inc., is set to debut its own BNPL service later this year.

Buy Now Pay Later coming to Apple Pay, Affirm stock takes a hit.

I expect Klarna’s down round to be reduced even further and key question will be if layoffs were deep enough. BNPL is now a commodity feature and risky given it’s effectively a subprime loan product. pic.twitter.com/QIk3FEGdYA

— Dare Obasanjo (@Carnage4Life) June 6, 2022

Apple Pay Later will allow consumers who shop with Apple Pay to split purchases into four payments every two weeks. Apple will underwrite the loans and fund them, The Wall Street Journal reported.

Apple will rely on credit reports and FICO scores to check applicants’ financial standing before approving the BNPL financing. 

Here are five things for Black America to know.

1.The BNPL market for Apple

Gen Z, Black adults, and Hispanic adults are more likely to use BNPL than the U.S. population as a whole, Morning Consult reported. About 12 percent of Black households have used BNPL, compared with 9 percent of White households.

Younger and less financially healthy households are four times more apt to use BNPL

And more and more people in general are turning to BNPL. Almost half (46 percent) of users had used BNPL three or more times in the previous 12 months, as of November 2021, Morning Consult reported.

2.Late payments growing

BNPL users tend not to be financially healthy; they often struggle with credit. Soe 43 percent of BNPL users report having subprime credit scores, compared with 24 percent of nonusers. And, 77 percent of BNPL users who also have credit cards with outstanding balances, compared to just 49 percent of nonusers, according to the Financial Health Network.

Because many BNPY users have financial difficulty, the number of late BNPL payment are growing. According to the Morning Consult’s survey, 20 percent of BNPL users missed a payment in January 2022. Another survey, this one by Lending Tree, found that 42 percent of BNPL users have made a late payment.

42% of buy now, pay later users made late payments toward those loans, per CNBC.

— unusual_whales (@unusual_whales) June 9, 2022

3. Opportunity for overspending

Nearly one-third (30 percent) of users spent more than they would have if BNPL hadn’t been available. Experts say BNPL can be a gateway to overspending for many consumers. In fact, nearly 70 percent of BNPL users admit to spending more than they would if they had to pay for everything upfront, Lending Tree reported.

4. Apple Pay Later and others

Apple Pay Later will joining many other companies in the BNPL business. Companies offering BNPL services include Affirm, Afterpay, PayPal, Sezzle, Zip, and Klarna; various banks, payment processors, and other firms.

5. Government probe

Concerned with the rapid growth of BNPL firms, in December 2021, the Consumer Financial Protection Bureau (CFPB) opened an inquiry into BNPL. The bureau said it was concerned about consumers “accumulating debt, regulatory arbitrage, and data harvesting in a consumer credit market already quickly changing with technology.”

Photo by Kindel Media: https://www.pexels.com/photo/a-woman-shopping-online-using-a-laptop-7007176/