Apple expands fintech ambitions in iOS 16

Apple is about to become a fintech company.

The company announced several new features for the iPhone’s Wallet app at its developer conference on Monday that compete directly with products from other fintech companies such as Affirm and PayPal. The big one: a buy now, pay later service called Apple Pay Later. That announcement sent Affirm shares down more than 5% on Monday, and they were down another 4% from Tuesday morning.

Apple will also launch a new payment system later this month that allows you to pay someone by pressing your iPhone against theirs. It is a direct competitor to Block’s Square. And Wallet in iOS 16 lets you track online orders you purchase through Apple Pay.

All of this points to one of the most interesting corners of the Apple ecosystem – a growing line of financial products in the Wallet app. Many of these features are not designed to make money directly for Apple, but they do make Apple Pay more attractive to people who have not tried it yet. (Apple charges a small percentage of each Apple Pay transaction, so the more people who use it, the better for Apple.) Like most major new iOS features, there is another mechanism to keep customers locked into Apple ecosystem and upgrade to a new iPhone when ready.

But Apple’s new Wallet features also come at a time of great financial uncertainty. Inflation is still going wild. Gas prices continue to reach record highs. And there are plenty of very real fears of an impending recession. It could be a tough time for Apple to launch a new product designed to get people to buy more things if these trends persist throughout the year.

Apple’s new rivals in buy now, pay later space have struggled in recent months as consumer spending shifts from goods to services. Other fintech and crypto companies such as Robinhood, PayPal and Coinbase have struggled this year as well.

Apple has a long-term vision for Wallet. When the company unveiled the latest features on Monday, executives said the ultimate goal is for the digital Wallet app to replace everything in your physical wallet.

But things are slow in some areas, such as last year’s feature that allows you to add your driver’s license, which is available in only a few states in the United States, and with a few more expected soon. Even then, you can only use the ID at TSA checkpoints at one Phoenix airport. Car manufacturers have also been slow to use the iOS feature that allows you to store a digital version of the car key on the phone.

Nevertheless, Apple told me yesterday that there is little concern about the slow adoption. The hope is that consumer demand will force third parties to adopt the technology.

On the fintech side, however, Apple is building a foundation to give a boost to its payment business by adding more features to Apply Pay and Wallet beyond just using the iPhone, instead of your credit card, to pay for things. And because of Apple’s scale of more than a billion devices in use, many more people are being exposed to these products.