Apple Inc (NASDAQ: AAPL) has spun off a wholly-owned subsidiary to handle lending for its recently introduced 'buy now pay later' service.
What Happened: Apple Financing LLC has acquired state lending licenses and will function independently of Apple to facilitate the new pay later service, reported Apple Insider, citing a Bloomberg report.
This marks Apple’s foray into incorporating loans and credit assessments and other financial businesses into the company, according to the report.
Apple has reportedly been moving financial services to a secret initiative dubbed internally as “Breakout.” A rumored subscription service that could power hardware purchases could also be underpinned by Breakout.
See Also: How To Buy Apple (AAPL) Shares
Why It Matters: Apple will rely on two streams of cash flow, first will be the easier purchase of Apple’s devices by customers via the pay-later service instead of traditional credit cards, followed by the service's transaction fee for merchants, noted Apple Insider.
There is no clarity on what this merchant fee would be and if it would be similar to a credit card merchant fee.
Apple introduced its Apple Card in March 2019 in partnership with Goldman Sachs (NYSE:GS) and Mastercard (NYSE:MA).
Previously, Apple has also offered buy now, pay later in Canada through a partnership with Affirm Holdings Inc (NASDAQ:AFRM).
Price Action: On Wednesday, Apple shares closed nearly flat at $147.92 in the regular trading and fell 0.5% in extended trading, according to data from Benzinga Pro.
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