Apple is starting to walk and talk like a bank. Could he become one?

Apple (AAPL -2.62%) appeared to surprise the market when it recently announced plans to offer a buy now, pay later (BNPL) offer in its wallet app, a new step into the financial services space for the consumer tech giant . Many have long feared that tech giants like Apple will one day become banks and offer traditional financial services because of their superior technology and customer acquisition capabilities. As Apple continues to walk and talk more like a bank, could the company ever get a banking charter and become one?

The BNPL offer

Customers who use Apple’s Wallet app to purchase items will have the option of forfeiting cash and refunding the purchase in installments at no additional cost or interest. The buy now, pay later payment format has become very popular among consumers and has also helped merchants to increase their sales.

Image source: Getty Images.

For starters, it will be a challenge for others in the BNPL space because of how well the offer is integrated. But Apple also plans to fund loans from its own balance sheet and make loan underwriting decisions through its own subsidiary, called Apple Financing. Typically, many consumer tech companies look to partner banks to help set up this kind of infrastructure, which is why this announcement has generated so much interest.

Apple is still in partnership with MasterCard to help it set up its BNPL offer. Mastercard offers a white label product and always communicates with suppliers to make the process possible. Goldman Sachs is the issuer of Apple’s credit card. Apple Financing has also apparently obtained all necessary state licenses to issue the BNPL loans.

Obtain a bank charter

Although it is very rare for a large technology company to obtain a banking charter, a large payments and technology company To block succeeded in obtaining an industrial bank charter after a very long process. An industrial bank charter is for a state-chartered bank with insurance from the Federal Deposit Insurance Corp. (FDIC), but it is somewhat more limited in nature.

So, while Apple might try to pursue a banking charter, I doubt that’s the case, given the length of the process and the pushback it might receive from the banking industry and other regulators due to antitrust concerns. With more than 1.8 billion active iPhones, if Apple ever pursues a charter and gets more involved in traditional banking, there could be data privacy concerns.

A recent example that comes to mind is Metaplatforms‘ foray into stablecoins, which are digital assets pegged to a commodity or fiat currency. Meta for years spent time and resources building a US dollar-backed stablecoin called Diem, but continued to run into regulatory issues. The company tried to partner with an issuing bank for the token, but eventually ended up selling the project. Many assume that regulatory issues were the main reason for the sale.

Finally, keep in mind that banking is a very heavily regulated industry, with most banks having three regulators. Even Block, with its industrial charter, is still regulated by the FDIC and the Utah Department of Financial Institutions. And then, once a company is a bank, it has to raise and hold regulatory capital, which doesn’t always excite investors so much.

Will this ever happen?

I find it unlikely that Apple will ever pursue a bank charter due to denial from regulators, the lengthy application process, and the need to hold regulatory capital. But maybe after setting up and managing some of its banking infrastructure, Apple will take more interest in it, especially if it sees serious profit potential. But even without getting a charter, Apple bringing its loan underwriting under its roof will give the company more data about its consumers’ finances, which could encourage Apple to offer even more financial services to the world. coming.

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