[Pay War]④ Will Apple Pay Also Launch Postpaid Payments?... "Low Business Feasibility" VS "Quite Possible"

BNPL 'Apple Pay Later' Sparks Debate
Domestic Launch Theoretically Possible
"Low Business Viability" VS "Increased Ecosystem Dominance"

[Asia Economy Reporter Minwoo Lee] Following the decision for Apple Pay to launch domestically, attention is turning to whether Apple’s postpaid payment financial service 'Apple Pay Later,' currently being prepared in the U.S., will also be introduced. Although it is legally possible to enter this market in Korea, there are forecasts that the business viability may be low. On the other hand, some view it as a sufficient means to further increase loyalty among the MZ generation (Millennials + Generation Z) in the long term.

According to major foreign media including Bloomberg on the 14th, Apple is internally testing the 'Apple Pay Later' service with thousands of store employees. It is a type of postpaid payment (BNPL) service that divides the payment amount into four installments over six weeks without fees or interest. Since its unveiling in June last year, expectations have steadily grown.

Apple Pay Approaching Visibility, Is BNPL Also Possible?

As the launch of Apple Pay in Korea becomes more tangible, interest in the launch of Apple Pay Later is also increasing. For now, domestic financial authorities hold the position that there is no problem if proper legal procedures are followed. Domestic BNPL services typically take three forms. First, when specialized credit finance companies engage in installment finance business. Hyundai Card has already provided BNPL services to the fashion platform Musinsa. Since Apple Pay is being launched through Hyundai Card, the launch of Apple Pay Later is also possible.

There is also the method through the Financial Services Commission’s innovative financial services system. Naver Financial (Naver Pay), Kakao Pay, and Viva Republica (Toss) are representative examples. The method chosen by Coupang is also possible. Unlike Naver Financial and Kakao Pay, which became BNPL operators themselves, Coupang operates a BNPL service called 'Pay Later' based on the concept of 'credit' only for directly purchased goods. Since they sell goods they have directly bought, they bear all losses from credit sales. This is why it is not classified as a financial business. A Financial Services Commission official explained, "Whether launched in partnership with financial companies or as an innovative financial service, as long as it is done legally, there is no problem with launching Apple Pay Later itself," adding, "How it will be offered is a matter for the business operator to decide."

'Possible' and 'Successful' Are Different... "Business Viability, Not So Sure"

However, just because something is possible does not mean all projects will proceed. Sufficient profitability must be expected. Opinions on the success potential of Apple Pay itself are divided, and the outcome of 'Apple Pay Later' could be even more uncertain. Industry views are somewhat mixed. First, there is an opinion that the 'cost-effectiveness' (performance relative to price) is lacking.

There are criticisms that partnering with Hyundai Card may not be very effective. In fact, in September last year, Hyundai Card, which partnered with Musinsa to launch Korea’s first BNPL service among card companies, suspended the service two months after launch. They introduced BNPL allowing installment payments without a card on Musinsa’s limited edition trading service 'Sold Out,' but it has been indefinitely suspended since. Hyundai Card explained this was for system upgrades, but the industry sees other reasons. Despite claims that managing delinquency rates, a known BNPL issue, was a burden, Hyundai Card dismissed this by stating there were zero delinquencies, saying delinquency rates were not a problem. Ultimately, the interpretation that the decision was made due to poor business viability is gaining traction.

A card company official said, "It seems the judgment was made that the business viability itself is low rather than delinquency rates," adding, "Unlike Naver or Kakao’s BNPL services, card company BNPL is classified as a financial business, so financial information is shared and credit scores drop if payments are late," and "Once started, it doesn’t seem to offer much advantage over card installments and requires a lot of effort, so it was judged to have low business viability."

That said, to be designated as an innovative financial service domestically, continuous dialogue with authorities is necessary, and the service design must be newly created. Annual extensions of the innovative financial service designation must also be obtained. For directly purchased products like Coupang’s, efforts are needed to meet the 'direct purchase' conditions. From Apple’s perspective, this is why there are criticisms that the 'cost-effectiveness' may be low.

Effective for Increasing MZ Generation Loyalty... "Long-Term Benefit"

Nevertheless, there are views that such burdens are worth bearing. Since the MZ generation shows high loyalty to Apple products such as the iPhone, it is analyzed that they can be made to purchase various Apple peripherals through Apple Pay, thereby becoming dependent on the ecosystem. According to a survey conducted by Korea Gallup in July last year, 52% of people in their teens and twenties answered that they use iPhones. The idea is that when purchasing power is low, they can buy relatively low-priced products with 'Apple Pay Later,' and when they become the 30s and 40s generation with purchasing power, they will use 'Apple Pay.'

Seo Jiyong, president of the Korea Card Association (professor of business administration at Sangmyung University), said, "Just as it took a long time to launch Apple Pay, even if Apple Pay Later is launched, it will take time and effort, but from a long-term perspective, the business viability is sufficient," adding, "Rather, considering that it strengthens ecosystem dominance in the early stages, it is possible to judge that bearing the costs and pushing forward could make it a winner later."