Apple's reported foray into buy now, pay later (BNPL) has sent the shares of specialists reeling. Afterpay and Zip of Australia and US-listed Affirm all lost about a tenth of their equity value on the news. It would be no surprise if BNPL piqued Apple’s interest at a touted total addressable market size of $30tn.
Klarna’s blitz of ads, influencers and reach across 250,000-plus merchants have helped it build a loyal consumer base. But Apple’s broader ecosystem makes its users stickier. A customer with Apple Pay might find it easier to make instalment payments. Klarna is lossmaking, while Apple’s bumper profits and multiple revenue streams give it flexibility to drive down fees and grab market share. PayPal, which on Wednesday waived late fees on BNPL payments in Australia, has already shown the way. If Apple went ahead, it would be a blow to an overvalued sector already facing regulatory threats. But it would be far from a death knell. Instead, expect tamping down of valuations and a lot more consolidation.