Tech giant pushing deeper into financial services…
Apple Will Handle Lending Itself With New Pay Later Service
(Bloomberg) – Apple Inc. will handle the lending itself for a new “buy now, pay later” offering, sidestepping partners as the tech giant pushes deeper into the financial services industry.
A wholly owned subsidiary will oversee credit checks and make decisions on loans for the service, which is called Apple Pay Later. The business – Apple Financing LLC – has necessary state lending licenses to offer the feature, though it operates separately from the main Apple corporation, the company said in response to Bloomberg questions.
The move marks the first time Apple is handling key financial tasks like loans, risk management and credit assessments. It’s a significant shift for a company that got its start selling computers. Until now, Apple’s financial services have been backed by third-party credit processors and banks.
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https://finance.yahoo.com/news/apple-handle-lending-itself-p…
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Wasn’t getting into financial services the reason for GE’s fall from grace?
I mean, other than hiring Jack Welch.
AW
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Wasn’t getting into financial services the reason for GE’s fall from grace?
I mean, other than hiring Jack Welch.
Both GE and Westinghouse had financial service divisions. Both lasted for many decades, and were primarily useful to help utilities and airlines buy products that were actually made by GE or Westinghouse, respectively. Those giant generators that power Hoover dam cost millions (back in the day when “millions” was a lot) and utilities didn’t have the kinds of bank accounts - or options for financing - that other mega industrials had. But GE and W could afford to finance the purchase, and the utilities could pay it off on the “time payment plan” through the reliable cash flow generated by their products.
Where Westinghouse got in trouble (ie: bankrupt) was turning the “credit” division into a full fledged CREDIT division, giving loans to shopping centers, golf courses, and anyone else who waltzed in, in return for fat fees and high rates (attractive to people who can’t get loans elsewhere, for obvious reasons), and it worked great until… the S&L crisis in the late 80’s, and then whoops! Toes up and in the morgue.
GE’s story is quite the same, just 20 years later, when they were relying on the “financial division” for gargantuan profits, and then, whoops! 2008.
If Apple sticks to its knitting, makes small loans to people buying their products it’ll be fine. If they start lending subprime to hookers with 6 houses, then head for the exit.
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Wasn’t getting into financial services the reason for GE’s fall from grace?
I mean, other than hiring Jack Welch.
I had the same thought when I read the announcement this morning. It will bear watching as it develops.
PP
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If Apple sticks to its knitting, makes small loans to people buying their products it’ll be fine. If they start lending subprime to hookers with 6 houses, then head for the exit.
Thing is, you put the salesmen in the stores in a conflicted spot: they are under pressure to sell stuff, and probably also put under pressure to sell the financing. RS started it’s private label credit card in the late 80s, and pressured the daylights out of the store to sell the credit card. What happened? The company had a huge problem with salespeople accepting and calling in credit apps when they had reason to believe the information on the app was wrong, just to get the District Manager off their back. Then there was the fraud going on at Wells Fargo as staff struggled to get management off their back.
Shortly after RS HQ sent out that memo about all the bogus credit apps being called in, a guy walked into my store, asked for a credit app, filled it out, and handed it back to me. As I reviewed the information on the app, he volunteered that he knowingly put false information on the app, because he figured the app would not be approved if he put the truth down. I promptly refused to process the app. The guy was probably one of RS’ mystery shoppers, who were always trying to entrap RS employees into doing something against policy.
Steve
Both GE and Westinghouse had financial service divisions… Where Westinghouse got in trouble …GE’s story is quite the same
Don’t auto makers also have financial services divisions? My impression is that their history is similar, but I don’t really know.
Don’t auto makers also have financial services divisions?
Yes, and, sometimes, the finance division blows up. GM sold 51% of GMAC to Cerberus Capital in 2006. In the fall of 2008, GMAC/Cerberus announced it would not finance anyone with a credit score under 720. The average GM customer’s credit rating was somewhere around 670. I remember the local media being in a panic that night, as GM was unable to finance the bulk of it’s customers.
Mitsubishi had a big push to finance people with a lower credit rating several years ago, and lost it’s shirt.
Bad Loans Bump Mitsubishi Motors Off Road to Recovery (paywall)
https://www.wsj.com/articles/SB106852879493712000
There have been several cases of retailers trying to do financing in house. As the RS District Manager was telling us “the customers will go where they can get credit, so get than RS card in their hands”. iirc, several of those in-house credit schemes have blown up in the retailer’s face.
Because there is an inherent conflict between the push to sell stuff, and prudent lending standards,
Steve
Those giant generators that power Hoover dam cost millions (back in the day when “millions” was a lot) and utilities didn’t have the kinds of bank accounts
Just a note…
The hoover dam was built from 1931 ~ 1936.
GE financial was started in 1932.
I guess they started diverting the river and building the dam, when someone realized they had to get a loan for the GE generators?
Mike