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iOS 16's New Apple Pay Option Lets iPhone Users Buy Now and Pay Later: How It Works

Apple Pay Later feature in Apple Wallet on an iPhone showing upcoming payments
The new Apple Pay Later feature in iOS 16 lets you split the cost of a purchase into four payments.

This story is part of WWDC 2022, CNET's complete coverage from and about Apple's annual developers conference.

What's happening

Apple has announced a new free financing feature in Apple Wallet that lets you pay for purchases over time for free.

Why it matters

As inflation continues to impact households, "buy now, pay later" services have become a popular payment option, and Apple's entry will likely become a major player.

What's next

Apple Pay Later will launch with the release of iOS 16, expected in September 2022.

The upcoming release of iOS 16 for iPhone will make Apple one of the bigger players in the "buy now, pay later" space. BNPL services let you spread the cost of your purchases into multiple payments made over a relatively short period of time, usually for no fees or interest. Apple announced the launch of its own service, Apple Pay Later, at last week's Worldwide Developers Conference

Apple Pay is a part of Apple Wallet, the iPhone's digital wallet app that also provides Apple Card and Apple Cash. Apple Pay allows you to store debit and credit cards and make purchases online or at businesses; Apple Card is a credit account issued by MasterCard and Goldman Sachs that works like a standard digital credit card; and Apple Cash enables peer-to-peer payments.

Apple's foray into free financing with Apple Pay Later comes at a time when many retailers are accepting payments from BNPL apps such as Affirm, Klarna and Afterpay. Most of these apps provide similar short-term interest-free payment plans, while others also provide longer installment plans with variable interest rates.

We'll share everything there is to know about Apple Pay Later in this piece, including how it will work, where it will be accepted and when it will be available. Apple unveiled Pay Later and iOS 16 alongside new versions of its MacBook and iPad. Here's everything Apple announced at WWDC

How does Apple Pay Later work?

Apple Pay Later lets you break the cost of purchases into four equal payments that are spread over six weeks. The first payment is due when you make your purchase, and the remaining payments are due every two weeks after that.

Once Apple Pay Later is released, you'll have two options when completing a purchase: Pay in Full and Pay Later. Selecting the latter option will bring up a payment schedule displaying the amount of each of the four payments and when they will be due.

According to Corey Fugman, senior director for Wallet and Apple Pay, who spoke about Wallet during the WWDC keynote address, Apple Pay Later will be available "anywhere that Apple Pay is accepted, in apps or online," indicating that the service may not be available for purchases made in physical stores.

Stores and merchants won't have to implement any changes in order to accept payments through Apple Pay Later. Transactions will occur as they did before -- the only difference will lie in how back-end payments are made.

MasterCard Installments, the credit card company's white-label BNPL service, will provide the merchant payments for Apple Pay Later. Apple and its banking partner Goldman Sachs began plans for Apple Pay Later in July last year, according to Bloomberg.

When can I use Apple Pay Later on my iPhone?

Apple Pay Later will be included with iOS 16, the next planned update of Apple's operating system for iPhone. The beta version of iOS 16 is already available for developers who have an account. In the WWDC keynote, Apple indicated that the first public beta version of iOS 16 will be released sometime in July.

Apple has traditionally released its newest operating systems to the public at the same time as its latest phones, as it did with iPhone 13 and iOS 15 in September last year. The iPhone 14 is expected to come out in September this year, and it's likely that iOS 16 will also be released at or near the same time. 

How is Apple Pay Later different from Apple Card Monthly Installments?

Apple Card Monthly Installments is an Apple program that lets you finance the purchase of certain Apple products when using the Apple Card credit card. The length of the 0% APR period for these purchases depends on the product. Installment plans range from six months to two years.

Apple Pay Later isn't restricted to Apple products, nor does it require the use of the Apple Card. With Apple Pay Later, you'll be able to finance purchases using a debit card, Apple specified, as long as it's connected to Apple Wallet. Also, the interest-free installment period for Apple Pay Later -- six weeks -- is much shorter than the payment plans offered by Apple Card Monthly Installments.

What else is new in Apple Wallet for iPhone?

Another new feature in Apple Wallet announced at WWDC is Apple Pay Order Tracking, which adds the ability for merchants to provide detailed receipts and delivery statuses for purchased products to customers via Apple Wallet. 

Apple also announced expanded support in Apple Wallet for driver's licenses and identification cards. Following IDs from Colorado and Arizona, Apple Wallet expects to add support for 11 more states in the near future.

These driver's licenses can be used at select Transportation Security Agency checkpoints. They can also be shared with other apps that require identification, such as alcohol purchases through Uber Eats.

Apple Wallet is also adding support for sharing keys for locations such as hotels, offices or automobiles. New features will let users share keys with friends or associates using email, text messaging or other messaging apps.

Like Apple Pay Later, the Apple Pay Order Tracking, driver's license and key-sharing features will be made available to the public with the full release of iOS 16, expected in September 2022.

What other online services let you buy now and pay later?

Some existing online payment systems provide "buy now, pay later" short-term financing similar to what Apple Pay Later is offering. PayPal's Pay in 4 program works very much like Apple Pay Later, except that purchases are limited to between $300 and $1,500.

BNPL app Sezzle also uses a system of four payments over six weeks, but permits users to reschedule one payment for up to two weeks later at no cost and postpone further payments for an additional fee.

Other BNPL apps such as Affirm and Klarna offer interest-free installment plans for short periods, or longer installment plans that add a variable interest rate. 

For more coverage of WWDC, learn about the upcoming MacOS Ventura, new fitness and workout features for the Apple Watch and all of the new features announced for Apple Maps.

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