Apple plans in-house fintech services, plans send current partners' stock tumbling

Apple is reportedly working on an in-house payment processing technology that will cover services like lending risk assessment, credit checks, fraud analysis, dispute handling, tools to calculate interest and rewards, approving transactions, increasing credit limits, reporting data to credit bureaus, etc. A part of this fintech project is called “Breakout” as it is going to see “Apple moving away from the current financial systems it uses”.

Currently, Apple works with a number of partners like Goldman Sachs and CoreCard (for Apple Card), Green Dot (for Apple Cash), and Citizens Bank (for the iPhone Upgrade Program). With Apple working on the new services now, the upcoming tech is going to be aimed at future products and not the current ones.

Apple already has Apple Pay and Apple Card, and it is also working on a subscription service option for hardware. Additionally, there is a “buy now, pay later” option for Apple Pay transactions. According to reports, this “buy now, pay later” feature, called “Apple Pay Later” internally, is going to be the first product to use Apple’s new fintech services. The company is going to include a four-payment Apple Pay purchase called “Apple Pay in 4” and another long-term payment option “Apple Pay Monthly Installments”.

Now, as per reports, the “Apple Pay in 4” option could use the new in-house payment processing tech, while the longer pay plan might carry on being handled by Goldman Sachs.

The company also acquired a UK-based startup called Credit Kudos recently that “uses data from banks to make lending decisions”. Apple might integrate this tech to help build its in-house services.

Going forward, Apple might also use its new services for the hardware subscriptions it has been planning and serve as a lender for more “buy now, pay later” services. “To start with, Apple could limit risk by requiring customers to use debit cards, plus its in-house risk assessment tools could take into account Apple purchase history and factors like whether a credit card attached to the App Store has been declined to determine whether a customer can use the payment services,” MacRumours speculates.

Reports also have it that Apple has faced “hurdles” while working on its financial services product, so it might take more time in rolling out than expected, or it might ditch the plans altogether and continue to work with partners, though the second possibility is a “very unlikely scenario”. Apple has no plans of dropping its current partners for now.

The news of Apple’s fintech plans sent the stocks of current partners tumbling. Green Dot fell by 8 per cent, CoreCard fell by 18 per cent, and Goldman Sachs fell by more than 1 per cent following Wednesday’s report.

As Business Insider points out, “having a fintech platform embedded in all iPhones is important as it could help fuel further growth for Apple and increase the stickiness of its ecosystem, which means people who already own an iPhone are less likely to switch to a competitor like Android”.

Also Read: Apple is not going to repair iPhones that have been marked stolen or lost

Also Read: Apple’s subscription service for iPhones, iPads: What we know so far