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iPhone's Buy Now, Pay Later Plan: How Apple Pay Later Will Work on iOS 16

Apple will soon offer BNPL options in Apple Pay, but it's not on iPhones yet.

Apple Pay Later feature in Apple Wallet on an iPhone showing upcoming payments
Apple Pay Later will soon let you finance purchases over six weeks with no fees or interest.
Apple

Apple's latest mobile software -- iOS 16 -- was rolled out Monday for all compatible iPhones. Users have already identified the coolest features and the most annoying ones, but there's at least one major feature that hasn't landed on iPhones yet. 

Apple Pay Later, Apple's entry into "buy now, pay later" (BNPL) services, was not included in the first release of iOS 16. After the release of iOS 16, Apple updated its page explaining the features of the new operating system and added a footnote to Apple Pay Later: "Coming in a future update for qualifying applicants in the United States for purchases online and in apps on iPhone and iPad. May not be available in all states."

Apple Pay is a feature within Apple Wallet, the iPhone's digital wallet app that also includes Apple Card and Apple Cash. Apple Pay lets you save debit and credit cards electronically and make purchases online or in brick-and-mortar stores; Apple Card is a digital credit card issued by MasterCard and Goldman Sachs; and Apple Cash is a peer-to-peer payment service.

Apple's entry into BNPL 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 a few offer longer installment plans with variable interest rates.

Learn everything there is to know about Apple Pay Later, including how it will work, where it will be accepted and when it will be available. 

How will Apple Pay Later work?

Apple Pay Later will let you break the cost of purchases into four equal payments spread over six weeks. The first payment will be 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.

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 has created its own financial subsidiary -- Apple Financial Services -- that will handle the loan approvals and credit checks. Banking partner Goldman Sachs will be the official loan issuer.

Payments for Apple Pay Later must be made with a debit card; you won't be able to use a credit card. You will be able to set up automatic payments or make additional payments at any time. Each BNPL purchase will be reviewed and approved or rejected using a soft credit check.

Apple Pay Later does not plan to charge fees for late payments, though it may use late payments as an excuse to reject future BNPL loans. There have been no maximum or minimum purchase amounts for Apple Pay Later announced yet -- an expected range for purchases is $25 to $1,000.

When can I use Apple Pay Later on my iPhone?

Apple Pay Later will be included with a future update of iOS 16, the latest update of Apple's operating system for iPhone. It's not clear yet exactly when Apple Pay Later will be released. iOS gets upgrades regularly, adding new features and fixing bugs. It's possible that Apple Pay Later could be part of a big release in November that includes the iPhone's new Emergency SOS service.

Apple Pay Later was not mentioned at the public Apple "Far Out" event on Sept. 7. At its WWDC event in June, Apple said that Apple Pay Later would launch "sometime in the fall."

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 other Apple Wallet features are in iOS 16?

One new Apple Wallet feature that launched with iOS 16 on Monday 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 expanded support in Apple Wallet for driver's licenses and identification cards. Following IDs from Colorado and Arizona, Apple Wallet plans to add support for 11 more states.

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

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.