I kinda love the idea of 1% interchange and someone shaking up the market. I really hate the idea of using my phone patterns as the new FICO. It just brings us down a 1984-style rabbit hole and a lot of abuse / lack of access to credit based on bunk patterns. It’s possible this actually expands credit markets to formerly unbanked folks but the downsides seem higher to me because of the surveillance.
Cut down on fraud, yes. Evaluate credit-worthiness from my phone metadata? No thanks - I’d advocate banning that wholesale.
A used iPhone 8 from 2017 is less than $100. This model runs iOS 16, and is pretty likely to receive security updates even after iOS 17 is released this September. It should remain secure enough for most unbanked transactions.
The iPhone XR (2018) and second generation SE (2020) are also pretty cheap on the secondary market, and will run iOS 17.
That's cool, a Tracphone is $15 and comes with free minutes. I can get a used one for free without service, and spend my $100 on feeding myself and family for another week.
Has anyone on this website ever actually been poor before, or are you all pretending based on the movies you watched? This entire thread is bumming me out big-time.
News Flash: even 94% of the homeless have a smart phone.
People are unbanked for all sorts of reasons, it doesn’t mean they can’t afford $35 a month for a phone - 2 hours worth of work even at McDonald’s these days.
In the US it is probably at least 50% of the unbanked population, the market share of iPhones to the aggregate population. Many people with limited resources rely on a smartphone for all of their internet access, and people in minimum wage, and what appear to be under the table types of service jobs don't seem to be carrying anything other than an iPhone.
Considering that Apple's phones receive software updates for at least five years, it's conceivable that many are being used by a second or even third owner.
The US is an outlier, though. You could very well correlate the iPhone market share with the overall higher cost-of-living. In pretty much every other country worldwide (particularly the less-banked ones) that equation looks a lot different.
I'm not sure the requirement of "can purchase Apple products at retail" quite aligns with "expanding credit to the unbanked". Premium luxury goods as a barrier to entry (especially when one is ineligible for carrier subsidies because they are unbanked) is a pretty high bar to clear.
Has nothing to do with China or cards and everything to do with American laws and culture. Europe also has 0.2-0.3% interchange rates on credit, they don't have consumer rewards programs. The high interchange rates pay for the rewards programs (and generate a ton of profit).
I heard the idea that Apple should buy Discover and thought there was no way…
Apparently Discover has a market cap of “only” $22 billion. $30 billion or so would definitely do the job; and that’s only, what, less than a quarter of Apple’s cash reserves?
Seems almost… cheap for buying an entire freaking payment network.
Eh, I feel like with the JCB and UnionPay alliance, you have a better chance of using Discover abroad than American Express (not to mention AmEx's higher merchant fees).
Those fees are the reason merchants in EU don't want to take amex.
I hate my work for saddling me with an Amex company card (in my name) and requiring I pay all my business expenses with it. In Eastern Europe and even Paris (taxis!) they will laugh in your face or at the very least the machine is suddenly "broken". At least give me a card that actually works.
What does revenue have to do with network effects?
On the contrary, if Apple wants instant and almost ubiquitous merchant acceptance, it would make much more sense to buy a low-volume but wide-reach network than one that's generating lots of revenue from fees, simply because it would be much more capital intensive to finance.
What market are you talking about? I know a single store in NYC that accepts (credit) cards but not Discover.
And as explained above, market price is an extremely poor proxy for network reach. Economic success as a payment network takes more than just reach; it’s necessary, but not sufficient.
Yes, this is definitely it. Even in Canada, one of the more similar markets to the US, Discover seems to be extremely sparsely used - not even talking about the rest of the world. On the other hand, Visa and Mastercard can be used essentially everywhere - they're ubiquitous.
To a newcomer wanting to establish themselves, volume is irrelevant, reach is everything, and Discover is accepted pretty much everywhere in the US that takes cards at all.
Abroad, they have "roaming" agreements with many other large networks such as JCB, China UnionPay, and Diners Club.
As far as I understand, Apple Pay can be used with any EMV contactless card reader and it works with all four major card networks (perhaps more outside the US). From the merchant's perspective, it's the same as someone tapping their physical Visa/Mastercard/Discover/Amex at the terminal.
Buying an operation like Discover doesn't seem radical enough. IMHO they need to do something like buy Flexa (https://flexa.network/) and do a complete end run around the entire TradFi payment space. If they do that, then the margins will be much better and they will be well positioned for the future. Although Apple has so much money, they could take both approaches at the same time.
If building a new global payments network from scratch was that easy, why would Apple buy an obscure, tiny player rather than just building their own network from scratch?
The value of an incumbent payment network isn't the technology or the revenue it generates; it's the network itself (in this case, in the form of merchant acceptance).
Right, Flexa is already integrated in a number of PoS (Point-of-Sale) devices and providers (e.g. NCR), which makes its merchant acceptance fairly broad already. Once stablecoin legislation occurs, then being able to accept something like USDC will be more valuable for merchants and since there are no chargebacks to worry about then the merchant fees will be substantially reduced. Something like 1% vs 4-5%.
> You’re saying this as if it’s a “when”, not an “if”.
Yes, the fact that Blackrock has now applied for a spot Bitcoin ETF makes it much more "when" than "if".
> Chargebacks aren’t something to worry about for customers – they are the reason they feel comfortable giving new merchants a try!
Correct, but merchants care a lot about how much they fork over to Visa/Mastercard for every purchase. Most people won't care about not paying through a credit card for small retail purchases. (e.g. People know if Starbucks got their order right and can have it fixed right there on the spot)
People dealt in cash long before credit cards ever existed. The scenarios where you really care about the chargeback protection do not make up a majority of purchases and can be addressed through other mechanisms. IMHO, credit cards will still exist in the future, just in a greatly reduced capacity.
My impression is that By Now Pay later schemes target people who by circumstance can't afford to "pay now"; resulting in overwhelmingly exploitative practices, constantly trying to nudge people towards BNPL who might struggle with the debt. Can someone elucidate for me the supposed benefit of the system?
For people who are half decent with money the companies that offer "12 months no interest" type plans are the best. In theory, it allows you to invest the capital up front for the 12 months and then pay it off. You essentially can reduce the cost by whatever the prevailing interest rate on a 12 month CD is.
But yes, these plans (usually deferred interest) are designed to exploit people who are bad with money. They also usually go out of the way to hide how much you're racking up in order to maximize gain. This kind of person thinks "What's another $1000" when their bill is already at $4000. Furniture stores are infamous for this.
> You essentially can make money buying something.
Well, only if you can earn more over 12 months than the asset you bought depreciated. I think a better way to look at it is that you can earn a small discount.
Fine, but the depreciation is not all that significant. Hypothetically, there is absolutely nothing stopping you from buying the device with Apple Pay Later for 0% interest, selling it unopened for full (or close to full) value, and making money from arbitrage that way.
As a result, depreciation can be written off, I think, since I would argue if you do buy it and keep it you’ve gotten value from it even if it isn’t cash.
I'm not sure this will fly, or at least I think it depends on the issuer and the law in the particular jurisdiction of the buyer.
I remember reading in the fine print of one issuer of BNPL in my country a statement that the buyer does not have full ownership of the product until after payment of the final installment of the loan has been received and confirmed by the issuer, implying that the product cannot be sold to a third party until the loan has been repaid in full. I am unsure if such a statement has any legal force but buyer beware.
Y'all, the original post was edited, but the quoted bit about being able to make money by buying things was indeed wrong, you don't end up with more money by buying stuff this way. GP seems to have edited their post to talk about buying at a discount instead, as was suggested by this post you're all now bagging on.
This is not what most buy now pay later volume is though. It is marketing to originate what is essentially a credit card to a consumer cohort that is rightfully risk adverse to credit cards.
That's not really the point I am making and I think you know it. BNPL options which let someone split a 500 dollar payment over 2 years are there to encourage people to spend money who otherwise wouldn't feel OK about dropping 500 dollars right then. I.e. if you have to use the BNPL option, you can't afford it in the first place. In fact, if you have to even stop and think about whether it's worth splitting it or not it means it's not a good idea.
I can afford to pay pretty much any household item including phones in full with cash right away. I rarely do if there's 0% interest payment option available. Prefer to invest money in stocks/funds and instant access savings account at 4%+ at the moment. No-brainer.
I once got an offer to buy glasses on installments - zero interests but as long as I was paying them off I would have a free insurance. If I paid the full amount I didn't get any insurance.
Why though? You're paying the same and if you just pay the 500 you don't owe anyone anything.
And if you do that with all your stuff (after all, why stop at your phone) your finances will be hella complicated. With all sorts of repayments being deducted at different days of the months, starting and finishing over time. I wouldn't want that. It's seems easier but it makes things more complicated.
Depends on the something. Inflation as it is today, the price of a new something in 12 months might be up 6% or more over those 12 months, but you're locking in the price today.
What kind of investment options exist for that? The amounts involved are usually very small and in 12 months the return will be insignificant. I bet you can count on your fingers the amount of people doing that worldwide, it's not really relevant for the conversation.
Yeah that kind of conversation makes sense on amortization of large amounts over long periods. If I buy something that costs $100 with a 0% interest rate on a BNPL scheme over 12 months, how much did I earn by investing that $100 elsewhere? Is there even a place that offers returns on that small amount of money? Even so, would it be anything more than a few cents? I guess you could buy half a stock of AAPL with it or something
I've done that a couple of times buying televisions from Best Buy. Take the 12 month no-interest offer, then pay it off in 11 months - it's free money.
However, they have changed the details in recent years. Prior to this it was an ordinary financing account. But now it is a Best Buy credit card account with a limit equal to the purchase price. This means that in the 1st month of the offer, you're at 100% utilization on that card. And this hurts your credit score. Not to mention it now has an annual fee with an interest rate potentially as high as 31.49%. And this is just too risky. Save your money, then buy what you want.
Well, given that there is no interest, it doesn’t seem to me that it’s particularly exploitative. It is, effectively, allowing you to buy someone you can’t yet afford, but without exploiting you. If anything, it’s a significant help.
As another example, it allows you to purchase a new laptop while selling your old one, such that you don’t hVe time without one at all.
There is absolutely interest if you can't keep up with the payment schedule, which is what every BNPL provider counts on. That is exactly why they push products that they know people can't afford and which have no resale value.
What? iPads have tons of resale value. Apple’s Pay Later has zero interest and a cap of $1000 of credit.
People are going to buy a new iPad whether Apple gives them an easier way to do it or not; the difference is with Apple’s Pay Later they’re only on the hook for the cost of the device, and not additional interest monthly on top of that.
They take a 30% or greater hit the second you take them out of the packaging, and even more after a newer version is released. Consumer electronics are not an appreciating asset. You will never be able to pay off the original debt by selling it.
Sure, and you’re not intended to. You’re buying a product that presumably, to you, has value. Apple is offering to let you have their valuable product by paying it off over time with zero interest. That’s it.
The point is that instead of laying the cash out upfront you can use that cash to generate income while you also have your valuable product you wanted to buy. Not sure why that’s hard to parse.
Precisely. And I am not defending the “interest free for a while but you’ll never pay it off and then get hit with 30%” crowd, although I do think it’s laid out pretty clearly in the paperwork. People do choose to live beyond their means. It’s a massive mistake.
The article's author seems to have tried to find penalties, but came up empty.
> Compared to other BNPL schemes, this writer hasn’t found anything about late payment fees, debt collection, or charges that kick in upon non-payment of a scheduled amount.
I did 45 seconds of research and found Apple's official confirmation:
> Apple Pay Later doesn't charge any fees or interest, even if your loan account goes past due.
Only because it is in pre release and not yet available to the general public. Apple isn't a fountain of free money. Of course they will collect on loans.
Affirm for example routinely sells past due debt to collection agencies. Has Apple said they won't do the same?
I would imagine that (as in any business) you want to offer the best possible terms early in the product lifecycle when it's subject to the most attention, and you want new adopters to be comfortable with it. Then you can add fees and penalties later on once you have a stream of customers dependent on it.
Without knowing the details of Apple's offering in particular, often there is "no interest" only in the way that overdraft charges and/or insufficient balance fees are not labeled as interest...
And even if you do manage to pay everything on time, on average you're better off with a credit card (pay after 30-60 days, i.e. 45 days average, and get at least 1.5% cashback vs. pay in four installments over 6 weeks, i.e. 3 weeks average, and get no cashback).
Merchant fees for BNPL are also higher than they are for credit cards, as far as I know.
> As another example, it allows you to purchase a new laptop while selling your old one, such that you don’t hVe time without one at all.
You can do the same with a credit card – you'll have at the very least 30 days to do so without paying a cent of interest. For most BNPLs, the first installment is due immediately at the time of purchase.
Credit cards are not the same, as they are general purpose and cause people to often spend beyond their means because of the concept of a minimum payment and interest. It’s awful, if you keep a balance, and many do because they have no other choice (can’t pay for food or rent, for example) but many also do because they live beyond their means (which is a huge mistake).
But that isn’t what Apple is doing, and the details matter.
Apple Pay Later lets you split a purchase into four equal payments over six weeks with no interest or fees; not years without a thought of paying it back. There isn’t even a hard credit inquiry, so it doesn’t hurt your credit.
The only fees of any kind associated with Apple Pay Later are insufficient funds fees or overdraft fees from your bank if you don’t have sufficient funds.
I had bad credit (grew up poor, learned terrible habits, getting better) for a long time and Affirm has been great. I do the every 2 weeks no interest loans and I love it compared to credit cards where I’d just irresponsibly carry a balance. The default “financial hygiene” of the loan and the fact that I’m paying for a product I remember makes it great for me.
There was a heat wave and I bought an air conditioner yesterday using Affirm to smooth out the payments.
In fact I cut up all my credit cards about a week ago and plan to only use BNPL vs credit cards going forward if I’m in need of a loan.
You don’t need to regularly pay off your credit cards to improve your score; you merely need to make the payments on time and not have too high a utilization ratio.
Also I am always surprised when people don't treat CC expenses as they would cash...
CC interest has always been intolerably high to me. I totally get emergencies and now I am out money. I don't get rolling balances when that costs you like 2% per month.
I know, I know, I can talk all day about being rational but then I REALLY want an RTX 4090 (to learn machine learning of course! Trust me bro! Then I just play video games on it and oh why not upgrade the rest of the computer, as an aside proud of myself I got an NVIDIA RTX3080 used for $400 instead) and there’s no way my wife would be okay with an $1800 expense on the debit card but she might not notice 6 months of $300 payments.
It’s easier to fight back when the loan terms are explicitly laid out, “okay you’re getting a one year loan and it’ll be $1000 loan and $300 you’re going to pay in interest”. And I’m like “okay I’ll wait and just save up”.
The lesson I learned growing up with a single mom was “spend the money immediately or else stepdad will spend it on drugs, money is a liability, you’re better off having things, harder to pawn vs cash”.
And credit cards just makes that highly dysfunctional mindset that’s burned into my brain even worse.
I do use them! I just wasn’t using them in a healthy way. I took a picture and am paying them off then plan on using them to pay bills then pay the balance every month. Before I would just swipe the card and make minimum payments and watch as the balance slowly crept up to the max. I starting paying them all off earlier in the year and some of the credit cards immediately did a 10x my credit line, then I thought “why not get a MacBook Pro?” Like I said, on me but credit cards are just a cognitive hazard for me and short circuit my brain (which is what creditors love!)
At least with Affirm or BNPL I know the exact terms and know it’ll be paid off in exactly a year. It’s much easier to reason about for my impulsive brain vs “loan that lasts forever from the credit card company and you pay absurd amounts of interest because you’re dumb”.
My mom declared bankruptcy twice so I’m still doing better than her but it’s hard to get an innate sense of “we don’t have the money for that” growing up in a household where if there was money in the bank it was spent ASAP.
On the bright side there’s more money in my 401(k) than I owe in debt, which is nice. I know the optimal strategy would be “contribute to the match then use the rest to pay off debts then increase” but I just don’t trust myself.
It’s like I’m in an eternal struggle with a rational me and an impulsive shopping spree dopamine seeking me, that just wants immediate gratification. Luckily it seems like with age the rational one is getting stronger.
That's only in the US. Here in Europe any debt reduces your credit rating, having no debts at all is much better.
It makes more sense too, after all what really proves that you're good with money is when you've never needed borrow in the first place.
"Churning" cards like in the US is the best way to tank any chance of getting a mortgage here. They really prefer to see customers with a clean slate.
Buying a phone on a pay later scheme, even a normal mobile contact that's for a minimum duration will hurt it (and will reduce your available mortgage by more than the actual loan amount)
If you have the discipline to pay off your Affirm loan every two weeks why can't you do the same with your credit card bill? In the latter case you are actually building credit history, getting consumer protection and earning points/miles.
Or if you really want to build better financial habits why even take loans every two weeks?
Oh, i didn't even realize that even though I've used them xD . They kinda railroaded me onto paying the right amount each time on time to pay 0% interest.
I just set it up and forgot about it and it worked.
Affirm has autopay and the loan terms are crystal clear. I certainly could structure my payments of the credit card like that but out of sight out of mind.
And the answer is because I am only 98% a rational human being. The other 2% is a weird vain conceited animal that doesn’t believe the future exists who wants shiny things and he wants them yesterday. I’m lucky my income has increased faster than my desire for more stuff, at least.
But to be fair, that number has improved quite a bit! In my 20s I was literally insane. Like, I took out student loans and lost all the money playing high stakes blackjack (Yes I realize that is absolutely insane).
At some point I realized the future is an actual place that really exists and have been trying to be more courteous to future me. Mostly after having children and not wanting them to live a horrible life because of me.
It would be fascinating to have a look at the finances of these schemes to see what the proportions are of people who use it to responsibly smooth out payments vs those who use irresponsibly and end up just getting deeper in debt (and all the variations between those two extremes). My hunch is the same as yours, but real-world data would be very interesting.
Nobody rational and responsible (with at least acceptable credit) uses BNPLs to "smooth out payments". The payment terms (100% after 3 weeks on average, vs. >98% after 4.5 weeks on average for credit cards) are strictly worse than those of credit cards.
As I said, this is my hunch too. But there is at least one sibling comment which says they do use it responsibly. Public, hard data would give a clear outline of the reality rather than supposition and insinuation, and it would then be much easier to challenge that practice as predatory (presuming that’s what the data did say).
I personally use buy now pay later whenever I can get 0% financing for a time. I get the item now, interest on my own money/investments, and they can eat the inflation. The main risk being if I get ahead of myself buying things I should just not buy. Even if I lose my income in the future my plan is simply to sell the items used, and to sell off the assets I gained in the process.
a CPI calculator says we've had about 25% inflation in the past 4 years, and my own basket of goods suggests it's closer to 50%. (For example gas in Texas has trough to peaked 300%, more like 200% on average). So I think the strategy might be a good one, albeit hard to get a ton of money behind (ie, I have yet to find a way to play it with $25k)
Yeah I worked in various computer shops in the mid 90s. And one of my bosses was a genuinely good guy (the others were sleazy sales guys who'd even screw me over on my hours)
One day I saw him sighing over the credit line forms for some of the customers of that day and he explained that these things are almost always used by people who can't afford it. He'd had some people in trouble trying to bring the stuff back which of course he couldn't do. And the head office didn't care.
Better to stay away from this crap.
I guess it makes some sense because today's 1 buck is only worth 90 cents next year but nope I just buy my stuff outright, even cars.
The only thing I'd get a loan for is a house. I don't even have a credit card, the only reason I ever had one was that debit cards weren't accepted everywhere but that's long fixed.
Left unsaid is the implicit threat that an Apply Pay Later scheme could utilize to enforce repayment, namely the control of your digital life in their walled garden.
Don't pay a BNPL scheme, maybe they start shaming you to your iMessage contacts or progressively disabling the apps that you can use on your phone.
Why would they? Like, that’s what laws are for, they have enough money to employ full time lawyers just for helping debt repayment enforcements through court.
I would really doubt that. Holding digital identity (e.g. iCloud email, iMessage etc) hostage would cause the general customer base to lose an immense amount of trust in them. As an example, I'm 100% in the Apple ecosystem and totally happy with it. I would dump it tomorrow if they went down that road.
If you think that 2% are going to that service, it's you who doesn't understand the math/economics.
Out of, let's call it 3% of blended-rate merchant fees for simplicity, about 2% goes directly to the issuing bank, who (at least in the US) passes on 1-2% to the cardholder in the form of "rewards". The fact that issuers can do this shows that card payments are priced extremely inefficiently.
That alone is quite ridiculous and has no bearing on the overall efficiency of Visa and Mastercard as global payment systems.
In the EU, interchange was recently capped at 0.3% for credit cards (i.e. at 1/10th of the US value), and most stakeholders have come out alive – the only thing that went away were these ridiculous rewards schemes, which effectively constitute a tax on people with poor credit and/or financial literacy.
The marginal cost of providing secure online payments probably lies somewhere well in the sub-1% region for domestic payments and a bit more when foreign exchange is involved.
I know this isn't really the point of the article, but to me it's mildly depressing to see so many companies jump on the Buy Now Pay Later bandwagon - you see it everywhere nowadays. Almost every "Add to Cart" button or checkout process is now adorned with "Pay in installments with <company name>".
To me, it indicates the decreasing purchasing power of the average consumer, combined with the desire to still buy all the new things. Using the screenshot from the article as an example - if you have no other option but to finance a $125 pair of shoes over the course of two months, buying them is probably not the best financial decision at the moment.
However, it seems to work quite well in the US, where people grow up with several credit cards in their wallet. I always wondered how far you can push that. Looks like we're about to find out.
At least with credit cards, you can use them wisely and still benefit from them (credit cards often have benefits that no debit card has, a high credit score can theoretically help you elsewhere, and so on).
But I agree that neither credit cards nor BNPL were created with benevolent intentions - a lack of financial literacy seems to be fairly common, and these payment methods are used as ways to make people feel richer than they actually are, and spend accordingly.
The profit model for credit cards is still the same though; if no one was over-extended, there would be no surplus on which to provide perks to those who aren't. This is just point of sale companies getting in on the game and decreasing the friction of buying things.
I suspect the increasing proportion of online stores offering these deals is due to the increasing proportion of payment platforms (Stripe et al.) integrating with the buy-now-pay-later operators, and stores seeing no reason not to allow customers to pay using those methods.
That said, a lot of these operators seem to be offering 0% interest: let's see how long that - and they - survive.
FedNow is operational. It just turned on last month. It's run by the Fed, like ACH and FedWire. It's much faster - seconds. The Fed charges $0.043 per transaction, and the transaction size is up to $100,000. Settlement is immediate; funds are available upon receipt. It's a US bank to bank system, mostly, like ACH and FedWire.[1] Many other countries have similar systems.
As banks roll this out to consumers, there will effectively be a ceiling on how much other money transfer services can charge. As with ACH and FedWire, this is a fixed fee service, not a percentage of the amount. This makes running a "payment rail" service far less profitable.
I find the US bank situation so interesting and confusing. In Mexico you can always make inter-bank transactions that are immediate without fees through the national bank. There even is a mobile app where one can send payment requests to customers / friends and they pay directly from their bank into your account, it works as qr codes or sms. You can even integrate it on your web sites!
Here in the US I recently learn you can even over turn your DEBIT account, how does that even work?!?!
Many countries have had good money transfer systems for years. The US had good credit card systems first, and so there was less demand for debit-side money transfer for routine transactions.
I know they can have benefits but all these debt devices, to me, are depressing. Overall I’m sure they do more harm than good. I can’t believe how many sites I see now accepting PayPal Pay Later, Klarna and Affirm all at once — often ahead of standard credit card payments. Seems like debt is the preference.
> Cathie Wood’s Ark ETF seems to find the payments margin opportunity, and the gang to get it there. In its Big Ideas 2023 paper, Ark points out that there are 9 steps between Buyer and Seller in a consumer payment transaction, sucking intermediary fees of roughly 2.8% of the value of the purchase. Ark believes enormous money is to be made if the steps between Buyer and Seller would be reduced from 9 to 3 (removing card networks, issuers, and acquirers, for the most part), thereby reducing the expense from 1.64% to 0.21% of the value of the transaction (leaving a massive 2.60% ‘take rate’ for its horse). If you’re looking for crazy, Cathie Wood’s group is a hot mess full of them.
Most of that "take rate" goes to the issuing bank, which returns it to the customer in the form of rewards, which can often be redeemed for cash, and a number of issuers now offer generic 2% cashback cards. There's also the added benefit of fraud protection (and the ability to charge-back, as a last resort). Anyone using Cash App or similar in lieu of a credit card, I just assume is financially illiterate.
I can never understand why there is a general cheer around large and powerful corporations (e.g. Apple) becoming even more large and powerful by acquiring other companies.
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[ 3.1 ms ] story [ 243 ms ] threadCut down on fraud, yes. Evaluate credit-worthiness from my phone metadata? No thanks - I’d advocate banning that wholesale.
The iPhone XR (2018) and second generation SE (2020) are also pretty cheap on the secondary market, and will run iOS 17.
Has anyone on this website ever actually been poor before, or are you all pretending based on the movies you watched? This entire thread is bumming me out big-time.
https://www.metrobyt-mobile.com/cell-phones/brand/apple
The SE3 is definitely no slouch when it comes to performance and will probablg get updates for years.
Apple released a security update for the 2013 iPhones 5s earlier this year.
People are unbanked for all sorts of reasons, it doesn’t mean they can’t afford $35 a month for a phone - 2 hours worth of work even at McDonald’s these days.
The phones are subsidized and are $0 with service
Considering that Apple's phones receive software updates for at least five years, it's conceivable that many are being used by a second or even third owner.
https://www.metrobyt-mobile.com/cell-phones/brand/apple
https://www.boostmobile.com/shop/iphone-12.html
Apparently Discover has a market cap of “only” $22 billion. $30 billion or so would definitely do the job; and that’s only, what, less than a quarter of Apple’s cash reserves?
Seems almost… cheap for buying an entire freaking payment network.
I hate my work for saddling me with an Amex company card (in my name) and requiring I pay all my business expenses with it. In Eastern Europe and even Paris (taxis!) they will laugh in your face or at the very least the machine is suddenly "broken". At least give me a card that actually works.
Quite
Visa 500b
Mastercard 380b
Amex 115b
On the contrary, if Apple wants instant and almost ubiquitous merchant acceptance, it would make much more sense to buy a low-volume but wide-reach network than one that's generating lots of revenue from fees, simply because it would be much more capital intensive to finance.
And as explained above, market price is an extremely poor proxy for network reach. Economic success as a payment network takes more than just reach; it’s necessary, but not sufficient.
But acceptance is definitely poor outside the US compared to Visa and Mastercard.
Abroad, they have "roaming" agreements with many other large networks such as JCB, China UnionPay, and Diners Club.
The value of an incumbent payment network isn't the technology or the revenue it generates; it's the network itself (in this case, in the form of merchant acceptance).
You’re saying this as if it’s a “when”, not an “if”.
> no chargebacks to worry about
Chargebacks aren’t something to worry about for customers – they are the reason they feel comfortable giving new merchants a try!
Yes, the fact that Blackrock has now applied for a spot Bitcoin ETF makes it much more "when" than "if".
> Chargebacks aren’t something to worry about for customers – they are the reason they feel comfortable giving new merchants a try!
Correct, but merchants care a lot about how much they fork over to Visa/Mastercard for every purchase. Most people won't care about not paying through a credit card for small retail purchases. (e.g. People know if Starbucks got their order right and can have it fixed right there on the spot)
People dealt in cash long before credit cards ever existed. The scenarios where you really care about the chargeback protection do not make up a majority of purchases and can be addressed through other mechanisms. IMHO, credit cards will still exist in the future, just in a greatly reduced capacity.
But yes, these plans (usually deferred interest) are designed to exploit people who are bad with money. They also usually go out of the way to hide how much you're racking up in order to maximize gain. This kind of person thinks "What's another $1000" when their bill is already at $4000. Furniture stores are infamous for this.
Well, only if you can earn more over 12 months than the asset you bought depreciated. I think a better way to look at it is that you can earn a small discount.
As a result, depreciation can be written off, I think, since I would argue if you do buy it and keep it you’ve gotten value from it even if it isn’t cash.
https://scholarship.law.unc.edu/cgi/viewcontent.cgi?article=...
https://www.consumerfinance.gov/about-us/newsroom/cfpb-study...
https://files.consumerfinance.gov/f/documents/cfpb_buy-now-p...
https://www.sfgate.com/news/article/influencers-lead-Gen-Z-i...
https://www.cnn.com/2022/07/06/economy/buy-now-pay-later-bnp...
https://www.cbinsights.com/research/report/buy-now-pay-later...
(disclosure: I have submitted public comments to various regulators on the topic)
Was totally a no brainer, and a no brainer.
And if you do that with all your stuff (after all, why stop at your phone) your finances will be hella complicated. With all sorts of repayments being deducted at different days of the months, starting and finishing over time. I wouldn't want that. It's seems easier but it makes things more complicated.
You can save money buying something, which in a spreadsheet may look the same but is very different.
However, they have changed the details in recent years. Prior to this it was an ordinary financing account. But now it is a Best Buy credit card account with a limit equal to the purchase price. This means that in the 1st month of the offer, you're at 100% utilization on that card. And this hurts your credit score. Not to mention it now has an annual fee with an interest rate potentially as high as 31.49%. And this is just too risky. Save your money, then buy what you want.
As another example, it allows you to purchase a new laptop while selling your old one, such that you don’t hVe time without one at all.
People are going to buy a new iPad whether Apple gives them an easier way to do it or not; the difference is with Apple’s Pay Later they’re only on the hook for the cost of the device, and not additional interest monthly on top of that.
And iPads are very resellable.
What are you talking about?
The point is that instead of laying the cash out upfront you can use that cash to generate income while you also have your valuable product you wanted to buy. Not sure why that’s hard to parse.
Many of the other 0% interest over 24 months hit you with all the accumulated interest at 30% if you don't pay off in full in that 24 months.
But that’s not what Apple is doing here.
> Compared to other BNPL schemes, this writer hasn’t found anything about late payment fees, debt collection, or charges that kick in upon non-payment of a scheduled amount.
I did 45 seconds of research and found Apple's official confirmation:
> Apple Pay Later doesn't charge any fees or interest, even if your loan account goes past due.
https://support.apple.com/en-us/HT213543
Affirm for example routinely sells past due debt to collection agencies. Has Apple said they won't do the same?
And even if you do manage to pay everything on time, on average you're better off with a credit card (pay after 30-60 days, i.e. 45 days average, and get at least 1.5% cashback vs. pay in four installments over 6 weeks, i.e. 3 weeks average, and get no cashback).
Merchant fees for BNPL are also higher than they are for credit cards, as far as I know.
> As another example, it allows you to purchase a new laptop while selling your old one, such that you don’t hVe time without one at all.
You can do the same with a credit card – you'll have at the very least 30 days to do so without paying a cent of interest. For most BNPLs, the first installment is due immediately at the time of purchase.
But that isn’t what Apple is doing, and the details matter.
Apple Pay Later lets you split a purchase into four equal payments over six weeks with no interest or fees; not years without a thought of paying it back. There isn’t even a hard credit inquiry, so it doesn’t hurt your credit.
The only fees of any kind associated with Apple Pay Later are insufficient funds fees or overdraft fees from your bank if you don’t have sufficient funds.
There was a heat wave and I bought an air conditioner yesterday using Affirm to smooth out the payments.
In fact I cut up all my credit cards about a week ago and plan to only use BNPL vs credit cards going forward if I’m in need of a loan.
Also I am always surprised when people don't treat CC expenses as they would cash...
CC interest has always been intolerably high to me. I totally get emergencies and now I am out money. I don't get rolling balances when that costs you like 2% per month.
It’s easier to fight back when the loan terms are explicitly laid out, “okay you’re getting a one year loan and it’ll be $1000 loan and $300 you’re going to pay in interest”. And I’m like “okay I’ll wait and just save up”.
The lesson I learned growing up with a single mom was “spend the money immediately or else stepdad will spend it on drugs, money is a liability, you’re better off having things, harder to pawn vs cash”.
And credit cards just makes that highly dysfunctional mindset that’s burned into my brain even worse.
It is the 25% APR that I think is a problem financially.
At least with Affirm or BNPL I know the exact terms and know it’ll be paid off in exactly a year. It’s much easier to reason about for my impulsive brain vs “loan that lasts forever from the credit card company and you pay absurd amounts of interest because you’re dumb”.
My mom declared bankruptcy twice so I’m still doing better than her but it’s hard to get an innate sense of “we don’t have the money for that” growing up in a household where if there was money in the bank it was spent ASAP.
On the bright side there’s more money in my 401(k) than I owe in debt, which is nice. I know the optimal strategy would be “contribute to the match then use the rest to pay off debts then increase” but I just don’t trust myself.
It’s like I’m in an eternal struggle with a rational me and an impulsive shopping spree dopamine seeking me, that just wants immediate gratification. Luckily it seems like with age the rational one is getting stronger.
It makes more sense too, after all what really proves that you're good with money is when you've never needed borrow in the first place.
"Churning" cards like in the US is the best way to tank any chance of getting a mortgage here. They really prefer to see customers with a clean slate.
Buying a phone on a pay later scheme, even a normal mobile contact that's for a minimum duration will hurt it (and will reduce your available mortgage by more than the actual loan amount)
Or if you really want to build better financial habits why even take loans every two weeks?
And the answer is because I am only 98% a rational human being. The other 2% is a weird vain conceited animal that doesn’t believe the future exists who wants shiny things and he wants them yesterday. I’m lucky my income has increased faster than my desire for more stuff, at least.
But to be fair, that number has improved quite a bit! In my 20s I was literally insane. Like, I took out student loans and lost all the money playing high stakes blackjack (Yes I realize that is absolutely insane).
At some point I realized the future is an actual place that really exists and have been trying to be more courteous to future me. Mostly after having children and not wanting them to live a horrible life because of me.
a CPI calculator says we've had about 25% inflation in the past 4 years, and my own basket of goods suggests it's closer to 50%. (For example gas in Texas has trough to peaked 300%, more like 200% on average). So I think the strategy might be a good one, albeit hard to get a ton of money behind (ie, I have yet to find a way to play it with $25k)
One day I saw him sighing over the credit line forms for some of the customers of that day and he explained that these things are almost always used by people who can't afford it. He'd had some people in trouble trying to bring the stuff back which of course he couldn't do. And the head office didn't care.
Better to stay away from this crap.
I guess it makes some sense because today's 1 buck is only worth 90 cents next year but nope I just buy my stuff outright, even cars.
The only thing I'd get a loan for is a house. I don't even have a credit card, the only reason I ever had one was that debit cards weren't accepted everywhere but that's long fixed.
Don't pay a BNPL scheme, maybe they start shaming you to your iMessage contacts or progressively disabling the apps that you can use on your phone.
thats illegal
>Social media and other electronic communications. A debt collector may not use social media to publicly post about a debt that they claim you owe.
https://www.consumerfinance.gov/ask-cfpb/what-laws-limit-wha...
2% for that service is worth it 100% and anyone who disagrees doesn't understand the math. 3% is probably too.
The problem is Visa et Al don't provide that. They provide it to consumers my demanding it from companies.
Hell even when the companies don't fit the bill sometimes the banks do instead.
But never does Visa pay.
Out of, let's call it 3% of blended-rate merchant fees for simplicity, about 2% goes directly to the issuing bank, who (at least in the US) passes on 1-2% to the cardholder in the form of "rewards". The fact that issuers can do this shows that card payments are priced extremely inefficiently.
That alone is quite ridiculous and has no bearing on the overall efficiency of Visa and Mastercard as global payment systems.
In the EU, interchange was recently capped at 0.3% for credit cards (i.e. at 1/10th of the US value), and most stakeholders have come out alive – the only thing that went away were these ridiculous rewards schemes, which effectively constitute a tax on people with poor credit and/or financial literacy.
The marginal cost of providing secure online payments probably lies somewhere well in the sub-1% region for domestic payments and a bit more when foreign exchange is involved.
My post was "if they offered risk mitigation 2-3% would be fine but they don't"
Even risk mitigation isn't that expensive, though. 0.4% seems to be a common fee for insurance against chargebacks.
To me, it indicates the decreasing purchasing power of the average consumer, combined with the desire to still buy all the new things. Using the screenshot from the article as an example - if you have no other option but to finance a $125 pair of shoes over the course of two months, buying them is probably not the best financial decision at the moment.
However, it seems to work quite well in the US, where people grow up with several credit cards in their wallet. I always wondered how far you can push that. Looks like we're about to find out.
But I agree that neither credit cards nor BNPL were created with benevolent intentions - a lack of financial literacy seems to be fairly common, and these payment methods are used as ways to make people feel richer than they actually are, and spend accordingly.
That said, a lot of these operators seem to be offering 0% interest: let's see how long that - and they - survive.
FedNow is operational. It just turned on last month. It's run by the Fed, like ACH and FedWire. It's much faster - seconds. The Fed charges $0.043 per transaction, and the transaction size is up to $100,000. Settlement is immediate; funds are available upon receipt. It's a US bank to bank system, mostly, like ACH and FedWire.[1] Many other countries have similar systems.
As banks roll this out to consumers, there will effectively be a ceiling on how much other money transfer services can charge. As with ACH and FedWire, this is a fixed fee service, not a percentage of the amount. This makes running a "payment rail" service far less profitable.
[1] https://www.frbservices.org/financial-services/fednow
Here in the US I recently learn you can even over turn your DEBIT account, how does that even work?!?!
Most of that "take rate" goes to the issuing bank, which returns it to the customer in the form of rewards, which can often be redeemed for cash, and a number of issuers now offer generic 2% cashback cards. There's also the added benefit of fraud protection (and the ability to charge-back, as a last resort). Anyone using Cash App or similar in lieu of a credit card, I just assume is financially illiterate.