Apple device users will soon be able to tap into buy now, pay later loans from Affirm for purchases, the companies said Tuesday.
Affirm will surface as an option for U.S. Apple Pay users on iPhones and iPads later this year, the San Francisco-based fintech company said in a filing. Apple confirmed the news in its own update.
“This provides users with additional payment choices, and offers the ease, convenience and security of Apple Pay alongside the features users love in Affirm – flexibility, transparency and no late or hidden fees,” Affirm said in an email statement.
The move is a boost to Affirm and the buy now, pay later sector in general. When Apple introduced its own BNPL product last year, investors were concerned that the tech giant would crowd out stand-alone providers like Affirm. But the fact that Apple decided to also allow Affirm products in its ecosystem shows that the fintech company has something unique to offer.
For instance, while Apple’s BNPL loan lets users repay purchases in four installments over six weeks, Affirm has an array of longer-term offerings that can be repaid over a year or more. The companies didn’t provide details on the terms of the new loans.
“The bottom-line — in our view — is that Affirm’s strong brand and sophisticated underwriting technology have a moat that Apple likely could not replicate on its own,” Mizuho Securities analyst Dan Dolev said in a research note.
Apple also said that installment loans via credit and debit cards would be available on Apple Pay in the U.S. with Citigroup, Synchrony and Fiserv-related issuers. Traditional credit card players have begun offering BNPL-style installment loans after their popularity surged during the Covid pandemic
Synchrony said in an email that it was planning personalized installment loans with promotions based on the transaction size and merchant involved, with the possible use of promotional interest rates and loan durations.
“This announcement with Apple marks an opportunity for Synchrony to scale our flexible payment options and offer our merchants the ability to expand their presence in a growing mobile payments ecosystem,” Mike Bopp, Synchrony’s chief growth officer, said in an email.
Thanks to the ubiquity of the iPhone, Apple Pay has more than 500 million users around the world and a leading market share in the U.S. for its mobile payment and digital wallet platform.
Shares of Affirm rose 11% Tuesday, while Apple’s stock was up 7.3%.
Affirm’s stock rose despite the fact that the company indicated it would take time for the partnership to significantly boost its revenue.
“Affirm does not expect this partnership to have a material impact on revenue or gross merchandise volume in fiscal year 2025,” the company said in its filing.
Synchrony Financial is investing in training its employees on emerging technology, with a focus on AI and automation.
Training options include “technology certifications mapped to critical skills in areas like cybersecurity, software engineering and UX design,” Tim Christensen, senior vice president of product, digital, innovation and AI at Synchrony, told Bank Automation News.
Courtesy/Bloomberg
The $117 billion financial institution offers skills tuition and debt-free tuition up to $24,000 annually, and up to $9,000 annually for technology certifications, according to a recent release from Synchrony.
Christensen said Synchrony offers the following training:
Apprenticeship Program: A full-time, 12-month program that allows employees with non-traditional backgrounds to learn and develop skills within technology;
Veterans Leadership Program: A 13-month skills and experience training in cybersecurity and data analytics to a class of veterans;
Business Leadership Program: A two-year rotational program that offers training in tech and operations; and
University Partnerships: Agreements with University of Illinois, University of Connecticut and Syracuse University to help students train in AI, data science and other emerging technologies.
“We are responsibly training and hiring our teams to ensure we have the right skills in place to succeed, especially around the use of AI and automation, along with many other emerging technologies,” Christensen said.
Aligning with innovation
Synchrony’s investment in tech training for its more than 20,000 employees aligns with its innovation strategy, Christensen said.
“Our focus on AI, and especially generative AI, is driving a need to both upskill existing talent and bring in new external talent, not just in technology, but across other functions like product development and governance,” he said.
The FI sees a growing opportunity for AI and automation in finance and is looking to the technology to boost customer experience and overall employee efficiency, he said.
Led by the U.S. Chamber of Commerce, the card industry in March sued the CFPB in federal court to prevent the new rule from taking effect.
That effort, which bounced between venues in Texas and Washington, D.C., for weeks, is now about to reach a milestone: a judge in the Northern District of Texas is expected to announce by Friday evening whether the court will grant the industry’s request for a freeze.
That could hold up the regulation, which would slash what most banks can charge in late fees to $8 per incident, just days before it was to take effect on Tuesday.
“We should get some clarity soon about whether the rule is going to be allowed to go into effect,” said Tobin Marcus, lead policy analyst at Wolfe Research.
The credit card regulation is part of President Joe Biden’s broader election-year war against what he deems junk fees.
Big card issuers have steadily raised the cost of late fees since 2010, profiting off users with low credit scores who rack up $138 in fees annually per card on average, according to CFPB Director Rohit Chopra.
As expected, the industry has mounted a campaign to derail the regulations, deeming them a misguided effort that redistributes costs to those who pay their bills on time, and ultimately harms those it purports to benefit by making it more likely for users to fall behind.
Up for grabs is the $10 billion in fees per year that the CFPB estimates the rule would save American families by pushing down late penalties to $8 from a typical $32 per incident.
Card issuers including Capital One and Synchrony have already talked about efforts to offset the revenue hit they would face if the rule takes effect. They could do so by raising interest rates, adding new fees for things like paper statements, or changing who they choose to lend to.
Capital One CEO Richard Fairbank said last month that, if implemented, the CFPB rule would impact his bank’s revenue for a “couple of years” as the company takes “mitigating actions” to raise revenue elsewhere.
“Some of these mitigating actions have already been implemented and are underway,” Fairbank told analysts during the company’s first-quarter earnings call. “We are planning on additional actions once we learn more about where the litigation settles out.”
Like some other observers, Wolfe Research’s Marcus believes the Chamber of Commerce is likely to prevail in its efforts to hold off the rule, either via the Northern District of Texas or through the 5th Circuit Court of Appeals. If granted, a preliminary injunction could hold up the rule until the dispute is settled, possibly through a lengthy trial.
The industry group, which includes Washington, D.C.-based trade associations like the American Bankers Association and the Consumer Bankers Association, filed its lawsuit in Texas because it is widely viewed as a friendlier venue for corporations, Marcus said.
“I would be very surprised if [Texas Judge Mark T.] Pittman denies that injunction on the merits,” he said. “One way or another, I think implementation is going to be blocked before the rule is supposed to go into effect.”
The CFPB declined to comment, and the Chamber of Commerce didn’t immediately respond to a request for comment.
Customers shop in a Walmart Supercenter on February 20, 2024 in Hallandale Beach, Florida.
Joe Raedle | Getty Images News | Getty Images
Walmart’s majority-owned fintech startup One has begun offering buy now, pay later loans for big-ticket items at some of the retailer’s more than 4,600 U.S. stores, CNBC has learned.
The move puts One in direct competition with Affirm, the BNPL leader and exclusive provider of installment loans for Walmart customers since 2019. It’s a relationship that the Bentonville, Arkansas, retailer expanded recently, introducing Affirm as a payment option at Walmart self-checkout kiosks.
It also likely signals that a battle is brewing in the store aisles and ecommerce portals of America’s largest retailer. At stake is the role of a wide spectrum of players, from fintech firms to card companies and established banks.
One’s push into lending is the clearest sign yet of its ambition to become a financial superapp, a mobile one-stop shop for saving, spending and borrowing money.
Since it burst onto the scene in 2021, luring Goldman Sachs veteran Omer Ismail as CEO, the fintech startup has intrigued and threatened a financial landscape dominated by banks — and poached talent from more established lenders and payments firms.
But the company, based out of a cramped Manhattan WeWork space, has operated mostly in stealth mode while developing its early products, including a debit account released in 2022.
Now, One is going head-to-head with some of Walmart’s existing partners like Affirm who helped the retail giant generate $648 billion in revenue last year.
Walmart’s Fintech startup One is now offering BNPL loans in Secaucus, New Jersey.
Hugh Son | CNBC
On a recent visit by CNBC to a New Jersey Walmart location, ads for both One and Affirm vied for attention among the Apple products and Android smartphones in the store’s electronics section.
Offerings from both One and Affirm were available at checkout, and loans from either provider were available for purchases starting at around $100 and costing as much as several thousand dollars at an annual interest rate of between 10% to 36%, according to their respective websites.
Electronics, jewelry, power tools and automotive accessories are eligible for the loans, while groceries, alcohol and weapons are not.
Buy now, pay later has gained popularity with consumers for everyday items as well as larger purchases. From January through March of this year, BNPL drove $19.2 billion in online spending, according to Adobe Analytics. That’s a 12% year-over-year increase.
Walmart and One declined to comment for this article.
One’s expanding role at Walmart raises the possibility that the company could force Affirm, Capital One and other third parties out of some of the most coveted partnerships in American retail, according to industry experts.
“I have to imagine the goal is to have all this stuff, whether it’s a credit card, buy now, pay later loans or remittances, to have it all unified in an app under a single brand, delivered online and through Walmart’s physical footprint,” said Jason Mikula, a consultant formerly employed at Goldman’s consumer division.
Affirm declined to comment about its Walmart partnership. Shares of Affirm climbed 2% Tuesday, rebounding after falling more than 8% in premarket activity.
For Walmart, One is part of its broader effort to develop new revenue sources beyond its retail stores in areas including finance and health care, following rival Amazon’s playbook with cloud computing and streaming, among other segments. Walmart’s newer businesses have higher margins than retail and are a part of its plan to grow profits faster than sales.
In February, Walmart said it was buying TV maker Vizio for $2.3 billion to boost its advertising business, another growth area for the retailer.
When it comes to finance, One is just Walmart’s latest attempt to break into the banking business. Starting in the 1990s, Walmart made repeated efforts to enter the industry through direct ownership of a banking arm, each time getting blocked by lawmakers and industry groups concerned that a “Bank of Walmart” would crush small lenders and squeeze big ones.
To sidestep those concerns, Walmart adopted a more arms-length approach this time around. For One, the retailer created a joint venture with investment firm firm Ribbit Capital — known for backing fintech firms including Robinhood, Credit Karma and Affirm — and staffed the business with executives from across finance.
Walmart has not disclosed the size of its investment in One.
The startup has said that it makes decisions independent of Walmart, though its board includes Walmart U.S. CEO, John Furner, and its finance chief, John David Rainey.
One doesn’t have a banking license, but partners with Coastal Community Bank for the debit card and installment loans.
After its failed early attempts in banking, Walmart pursued a partnership strategy, teaming up with a constellation of providers, including Capital One, Synchrony, MoneyGram, Green Dot, and more recently, Affirm. Leaning on partners, the retailer opened thousands of physical MoneyCenter locations within its stores to offer check cashing, sending and receiving payments, and tax services.
But Walmart and One executives have made no secret of their ambition to become a major player in financial services by leapfrogging existing players with a clean-slate effort.
One’s no-fee approach is especially relevant to low- and middle-income Americans who are “underserved financially,” Rainey, a former PayPal executive, noted during a December conference.
“We see a lot of that customer demographic, so I think it gives us the ability to participate in this space in maybe a way that others don’t,” Rainey said. “We can digitize a lot of the services that we do physically today. One is the platform for that.”
One could generate roughly $1.6 billion in annual revenue from debit cards and lending in the near term, and more than $4 billion if it expands into investing and other areas, according to Morgan Stanley.
Walmart can use its scale to grow One in other ways. It is the largest private employer in the U.S. with about 1.6 million employees, and it already offers its workers early access to wages if they sign up for a corporate version of One.
There are signs that One is making a deeper push into lending beyond installment loans.
Walmart recently prevailed in a legal dispute with Capital One, allowing the retailer to end its credit-card partnership years ahead of schedule. Walmart sued Capital One last year, alleging that its exclusive partnership with the card issuer was void after it failed to live up to contractual obligations around customer service, assertions that Capital One denied.
The lawsuit led to speculation that Walmart intends to have One take over management of the retailer’s co-branded and store cards. In fact, in legal filings Capital One itself alleged that Walmart’s rationale was less about servicing complaints and more about moving transactions to a company it owns.
“Upon information and belief, Walmart intends to offer its branded credit cards through One in the future,” Capital One said last year in response to Walmart’s suit. “With One, Walmart is positioning itself to compete directly with Capital One to provide credit and payment products to Walmart customers.”
A Capital One Walmart credit card sign is seen at a store in Mountain View, California, United States on Tuesday, November 19, 2019.
Yichuan Cao | Nurphoto | Getty Images
Capital One said last month that it could appeal the decision. The company declined to comment further.
Meanwhile, Walmart said last year when its lawsuit became public that it would soon announce a new credit card option with “meaningful benefits and rewards.”
One has obtained lending licenses that allow it to operate in nearly every U.S. state, according to filings and its website. The company’s app tells users that credit building and credit score monitoring services are coming soon.
And while One’s expansion threatens to supersede Walmart’s existing financial partners, Walmart’s efforts could also be seen as defensive.
Fintech players including Block’s Cash App, PayPal and Chime dominate account growth among people who switch bank accounts and have made inroads with Walmart’s core demographic. The three services made up 60% of digital player signups last year, according to data and consultancy firm Curinos.
But One has the advantage of being majority owned by a company whose customers make more than 200 million visits a week.
It can offer them enticements including 3% cashback on Walmart purchases and a savings account that pays 5% interest annually, far higher than most banks, according to customer emails from One.
Those terms keep customers spending and saving within the Walmart ecosystem and helps the retailer better understand them, Morgan Stanley analysts said in a 2022 research note.
“One has access to Walmart’s sizable and sticky customer base, the largest in retail,” the analysts wrote. “This captive and underserved customer base gives One a leg up vs. other fintechs.”
Banks are identifying uses for generative AI and finding ways to make it effective and responsible. According to a Dec. 11 report by consulting giant EY, 100% of respondents said they are either already using or plan to use generative AI within their institutions. The report surveyed 300 executive directors, managing directors or higher at […]
Synchrony Financial is expanding its distribution network through acquisition and additional product offerings in 2024. The Stamford, Conn.-based company “continued to diversify our programs in 2023, broadening the utility of our offerings and extending our reach,” President and Chief Executive Brian Doubles said today during Synchrony’s fourth-quarter 2023 earnings call. Synchrony is working toward providing […]
Ally Financial today agreed to sell its point-of-sale financing business along with its loan books to Synchrony Financial for an undisclosed price. The $196 billion Detroit-based bank is looking to simplify its organization and move away from sectors where it has no scale to grow after the banking crisis of 2023, Chief Executive Jeffrey Brown […]
is likely to generate strong interest from the healthcare company’s shareholders, resulting in participants being able to swap only a portion of their J&J stock.
Investors searching for income have many options these days, but choosing where to put their money isn’t necessarily as simple as going for the highest yield. The Federal Reserve’s latest rate-hiking cycle, which began in March 2022, has had the pleasant side effect of raising yields on otherwise boring assets, including short-term Treasury bills. To compete for investors’ dollars, banks have also boosted rates on high-yield savings accounts and certificates of deposit. Meanwhile, yields on money market funds have also ticked higher: The Crane 100 Money Fund Index touts a 7-day current yield of 4.92% as of June 18. Many people believe the period of Fed rate increases is winding down. The central bank held off on a June rate hike , but it indicated two more were coming later this year. That would push the benchmark rate to 5.6% . Before you start putting your money into income-producing products, first determine your overall investing goals and what you are trying to accomplish, said certified financial planner Jamie Hopkins, managing partner of wealth solutions at Carson Group. “We don’t invest in a vacuum,” he said. “We have reasons for it.” Also, understand why you are seeking income: Is it to improve returns, diversify your investments or is it an actual source of income? Your time frame – whether it is one year or 20 – is also an important factor, as is the amount of money you want to invest and how much liquidity you need with your investment, Hopkins said. Where the Fed stands in its rate-hiking cycle is also a key consideration. Some analysts and strategists have proposed adding longer-dated bonds – that is, going out 5 to 7 years or even 10 years – to portfolios to mitigate the reinvestment risk they’d face on shorter-dated issues if the central bank began cutting rates. “We are in a sweet spot now,” said Don Grant, a CFP and investment advisor with Sabre Wealth. “So, if you can find something that has liquidity or that you can lock in at around 5%… do it now.” Here’s what to consider when looking at ways to earn income right now. Treasurys You don’t have to take an excessive amount of risk to snap up attractive yield in the current interest rate environment. Three-month T-bills offer a yield of 5.2%, while 2-year Treasurys offer a rate of 4.7%. For short-term cash needs, T-bill ladders have given investors a way to earn some interest on otherwise idle cash. “You can buy a six-month T-bill and it’s 100% safe,” said Jordan Benold, a CFP at Benold Financial Planning. “The maturity is so short, and you get 5.3% on an annualized basis. It’s great income and safety, and if you’re still growing [your investments], it’s very uncorrelated to the stock market.” Money market funds Assets in retail money market funds grew to $1.99 trillion, according to the latest data from the Investment Company Institute . Investors might appreciate the convenience of money market funds – they’re easily available within your brokerage account – but they should be fee conscious, as high expenses eat away at returns. Further, even as money market funds offer relative safety, they can still face some risk. Remember that the Reserve Primary Fund slipped below its $1 net asset value during 2008, amid the great financial crisis. Some of the underlying holdings in the fund included commercial paper issued by Lehman Brothers, and the fund encountered redemption problems as investors rushed to cash out. Don’t confuse money market funds with money market accounts. Though money market accounts – which are offered by banks – are protected by the Federal Deposit Insurance Corporation, up to $250,000, money market funds are not. “They’re pretty safe, but they’re not insured, and that’s something that people are aware of in a way they haven’t been in a long time,” said Danika Waddell, CFP and founder of Xena Financial Planning. Certificates of deposit and high-yield savings accounts Liquidity should be a big factor for investors eyeing bank products like CDs and high-yield savings accounts. Depositors who are fine with locking up money in a CD for 12 months are rewarded with attractive yields. Consider that Bread Financial touts an annual percentage yield of 5.25% for a 1-year CD, while a BMO Alto CD offers a 5.1% yield for the same length of time. The trade-off is that you may forfeit some of your interest if you pull your money before the term. You can also shop around for CDs with no penalties, which are available at Ally Financial , CIT Bank — whose parent is First Citizens BancShares — and Synchrony Financial . All three banks offer 11-month instruments with yields exceeding 4% and no penalty. Waddell notes these CDs might be a good place to keep emergency funds. High-yield savings accounts offer easier access to your funds, but the rate isn’t quite as rich. Multiple institutions, including Ally, Capital One and Synchrony Financial are offering yields of at least 4%. The catch, of course, is that the bank can change the rate on your high-yield savings account, while you can lock in the rate on a longer-term CD. Both CDs and savings accounts are subject to the FDIC’s protection, but you should know the standard deposit insurance amount is $250,000 per depositor, per insured bank and per ownership category.
The opening days of the first-quarter earnings season have spurred a sigh of relief among investors, especially when it comes to the regional banks whose future seemed seriously in doubt just a month ago. The headliner of the group is Western Alliance , which said on Tuesday that its deposits dropped 11% in the first quarter, to $47.6 billion, but that the trend has reversed and deposits grew by $2 billion in the first two weeks of April. The stock surged by 24% on Wednesday after being down about 45% for the year before the report. WAL 1D mountain Western Alliance’s stock surged on Wednesday. The inflows of deposits suggest that individual and business customers have grown comfortable with the banks again after a wave of withdrawals led to the failures of Silicon Valley Bank and Signature Bank in March. “It appears that mgmt. has stabilized the liquidity stress that it experienced in the aftermath of SVB’s failure,” Bank of America analyst Ebrahim Poonawala said in a note to clients about Western Alliance’s report. Similarly, Wells Fargo analyst Timur Braziler said in a note that “existential risk” is off the table for Western Alliance, and that sentiment could be extended across much of the group. For example, Wedbush upgraded Western Alliance to outperform from neutral and added the stock to its best ideas list, but it also added Regions Financial , M & T Bank and New York Community Bancorp . A quick glance at the early reports from the biggest regional banks show only modest deposit declines in the first quarter. One deposit drop that caught some analysts off-guard among the larger regional banks was a nearly $20 billion decline at US Bancorp , but the bank still has more than $500 billion in deposits. More than half of the decline came from accounts associated with MUFG Union Bank, which US Bancorp acquired late last year. The much smaller SVB, by contrast, suffered more than $40 billion in withdrawals in a single day before it was seized by regulators. There were even some smaller banks that reported growing deposits for the first quarter, including Pinnacle Financial Partners and United Community Banks . Consumer finance company Synchrony also reported an expanded deposit base. Longer term outlook However, the stabilized funding may not be enough for the regional bank stocks to catch up to their larger competitors, which are viewed as safer and have more diversified businesses. “We’re struck by the dichotomy developing between the big banks and the small banks… the former have stabilized post JPM earnings, while the latter continues to plumb fresh lows,” Strategas partner Chris Verrone said in a note to clients on Wednesday morning. Even if deposits stabilize, a shift away from noninterest-bearing accounts is squeezing profit margins at all manner of financial institutions. Citizens Financial , for example, cut its full-year guidance for net interest income growth to 5%-7% from 11%-14% previously. The loan books for these banks could also hold back the stocks. A potential recession could cause credit losses at regional banks in the coming months, and commercial real estate exposure is particularly concerning for investors. And there is at least one big hurdle still to come for regionals this earnings season. First Republic , which saw larger banks step in to refill its deposit base last month, is set to announce its results next Monday, April 24. — CNBC’s Michael Bloom contributed to this report.
Pour one out for the beleaguered economists, who for once got an important indicator, the consumer price index, right on the nose, after CPI fell 0.1% in December, while core prices rose 0.3%.
“The 2021 surge in durable goods demand normalized, and the resulting collapse in durable goods price inflation was stunningly fast,” says Paul Donovan, chief economist of UBS Global Wealth Management.
“The commodity wave of inflation is fading, and that leaves the profit margin expansion in focus,” he adds. What a good time for earnings season to be upon us, and what do you know, it is, kicking off with the banking sector on Friday before broadening out next week.
Strategists at Goldman Sachs have a new note out, saying that the market is pricing in a soft landing even though the trend of earnings revisions points to a hard landing.
They’re not that optimistic — even in the soft-landing scenario, the team led by David Kostin say the S&P 500 SPX, +0.40%
will end the year right around current levels, at 4,000. But they identify 46 stocks that could benefit — profitable, cyclical companies that are trading at price-to-earnings valuations below their 10-year median, among other factors.
One name jumps out: Tesla TSLA, -0.94%,
which trades at 22 times forward earnings versus the 10-year median of 117 times. But the other 45 names are less flashy, ranging from Capital One COF, +1.81%
and Carlyle Group CG, +0.54%,
to a host of industrials including 3M MMM, +0.12%,
Parker-Hannifan PH, +0.73%
and Otis Worldwide OTIS, +0.42%.
As a whole, these typically $10 billion companies are trading at 12 times earnings, versus 17 times usually.
In the hard landing scenario, S&P 500 profit margins would shrink by 125 basis points, to 10.9% — about in line with the median peak-to-trough decline during the eight recessions since 1970, which has been 132 basis points. Consensus expectations are for a 26 basis-point margin decline.
The Goldman team also have a 36 stock screen for a hard landing — profitable companies in defensive industries with a positive dividend yield. They’re typically food, beverage and tobacco companies as well as software and services companies — including Costco Wholesale COST, +0.58%,
Kroger KR, -0.99%,
Altria MO, +0.48%,
Tyson Foods TSN, +0.23%,
Microsoft MSFT, +0.30%,
MasterCard MA, -1.13%
and Visa V, -0.25%.
As a whole, these $37 billion companies are trading at 22 times earnings vs. a historical 24 times.
The market
After a 2.3% advance for the S&P 500 SPX, +0.40%
over the last three sessions, U.S. stock futures ES00, +0.39%
JPMorgan shares slumped after forecast-beating earnings, though investment bank revenue came in light of estimates. Delta shares also declined after topping earnings estimates.
Virgin Galactic SPCE, +12.34%
surged after saying it’s on track to launch space-tourism flights in the second quarter.
Apple AAPL, +1.01%
says CEO Tim Cook requested, and received, a pay cut after investor criticism.
The University of Michigan’s consumer-sentiment index is due at 10 a.m. Eastern, and Minneapolis Fed President Neel Kashkari and Philadelphia Fed President Patrick Harker are due to speak.
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