Is Apple, Inc. (AAPL) on its way to become a digital bank?

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AAPL Stock
AAPL Stock

Electronics maker Apple Inc. (NASDAQ: AAPL) has recently taken a number of steps to grow its financial services segment. Investors and Wall Street pundits have revived the old theme of tech giants replacing banks. Are Apple shares the start of this historic turnaround?

The recent news of Apple entering the Buy Now Pay Later (BNPL) marketplace came as a surprise. Unlike the Apple Pay mobile wallet or the Apple Cash transfer service, the BNPL service is purely financial and is not directly related to the electronic activity.

At the same time, Apple has approximately $30 billion in cash and cash equivalents, which means the company has sufficient financial resources to rapidly scale the BNPL service to the level of leaders in this market, such as the private company Klarna.

The new service is available on the Apple Wallet app and allows users across the Apple ecosystem to purchase products in installments without charge or interest. It is a very popular means of payment for purchases among young people as well as among traders, who can thus significantly increase sales.

Apple’s innovation cannot be ignored. First, it could reach Apple’s massive audience: there were more than 1.2 billion active iPhones worldwide at the end of 2021.

In addition, Apple is working on the BNPL service in partnership with Mastercard, which will be able to offer its services as a card issuer. Apple also has a partnership with another issuer, Goldman Sachs, which issues Apple credit cards.

Additionally, Apple plans to fund the BNPL service itself through its Apple Financing subsidiary. You may have already received the necessary approvals for BNPL loan services.

Thus, Apple has the possibility of eventually receiving the status of an industrial bank (industrial bank) and the corresponding right to deposit insurance with the American organization FDIC.

Achieving this status is a long and complex process, but Block (formerly Square) has done it before. If Apple manages to overcome resistance from antitrust regulators, new players will appear in the financial services market.

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