Apple BNPL vs Monzo

Yep, but I see where they’re coming from!

It’s an easy mistake to make, because 1.5% is higher than 1%. Only you’re getting 1/4 of that over a course of 3 months from APR. Whereas with cashback you get 1%.

Interest from buying with Chase is 1%. On a £999 phone, that’s £9.99.

Interest earned by keeping it savings is 0.375%. £3.75 in interest on £999 worth of savings. But it’s not quite that simple with Monzo flex and is why I don’t use it the way I use PayPal credit.

You have to pay 1/3rd up front. That leaves you £666 to earn interest on. 83p interest for the first month. Then your second payment is taken leaving you with £333 to earn interest on. 42p interest for that second month. Then your final payment is taken. And this is where Monzo’s marketing spin cleverly confuses you. It’s not 3 months, but actually two. £1.25 interest in total. I’d take the cashback, or a better credit deal.

I suppose it’s better than nothing if you need section 75 or you don’t have the full amount up front, or both. Monzo Flex isn’t really a good option for this sort of use case though, not when things like PayPal credit exist, which is twice as long and doesn’t require instalments.

So to answer their question:

Because (assuming the base model iphone 13 pro) you’re £8.74 better off with the cashback. Other prices will vary, but there’s no scenario where the cashback doesn’t produce better returns.

3 Likes

Now I’m a bit confused with that math. Does BNPL not offer its own rewards in the UK? At least here in the States, Klarna also offers rewards as you pay. You get a $5 voucher to Starbucks, Amazon, Walmart (they used to own Asda but not anymore I think?), or some other stores (your choice) after successfully paying off $250 of purchases, and then another $5 voucher for every $500 you pay off thereafter. And that’s on top of the fact that I can pay off Klarna with any credit or debit card, so I can earn cashback (or airline miles, or hotel points) on top of what Klarna rewards me with (although Klarna payments don’t count towards category bonuses, so if I buy a plane ticket, then paying off my Klarna installments with a travel credit card doesn’t reward me with extra cashback or points).

Which is why I’ll be curious to see what Apple comes up with to make it worth using their service over Klarna.

That’s assuming that I use Chase for spending, which I don’t, for $reasons.

4 Likes

Nope!

Using Klarna you don’t get rewards however with ClearPay you get discounts etc as you pay for retailers on their app however not for those types of merchants.

Klarna is more widely accepted than clearpay.

Seems relevant:

Buy now, pay later must be regulated — now

Industry operators are money lenders and should be treated as such before it blows up in all our faces

4 Likes

Interesting, though not surprising given recent chatter around this. What I wonder is how Apple will deal with reputational issues when it starts having to do debt collection on people who don’t make their payments. Hard to keep your hands clean when you get into lending…

2 Likes

It was reported in the FT as well. The important bit being:

Goldman is facilitating Apple Pay later by allowing Apple to access MasterCard’s network since the iPhone maker lacks a license to issue payment credentials directly. But Apple is handling the underwriting and lending using a new subsidiary.

I’m looking forward to whether Apple uses this new company to start to expand around the world (specifically the UK). It also explains why its only a 6 week repayment plan, not 3 to 12 months if Apple has the liability.

(FT sub needed) Apple sidelines Goldman Sachs and goes in-house for lending service

1 Like

Sounding like this will be the first and only BNPL product on the market (to my knowledge) that isn’t proactively predatory or exploitative. Nice.

2 Likes

Predatory and exploitive?

They’re not going to push you to use it if you don’t need or want it. it’s not designed to be addictive to YOLO borrows and it has a responsible cap ($1000).

Other BNPL lenders offer crazy high limits that would be nigh unaffordable without paying interest. Their loops are addictive which make you want to use it even when you don’t need it. And they proactively promote and encourage use of the product, as opposed to just the product itself.

They’re not going to fleece you with any interest or fees ever if you wind up not being able to pay.

To my knowledge, no other BNPL product in the world behaves like this.

Here’s the specific quote from the article:

It’s far less likely that people would struggle to repay a relatively small sum borrowed for just a few weeks – and if the worst happens, Apple still won’t charge interest or late fees; it will eat the cost rather than risk being seen as preying on those with difficulties

2 Likes