High-tech companies are quickly becoming financial institutions


Apple’s Buy Now Pay Later plan is last on screen

Image from techradar.com

Is it hard to spend money? With the advent of financial technology over the past 40 years, we no longer have to visit a bank regularly so that we can use our phones to apply for credit, transfer funds and Paywave.

Now it looks like the tech giants are taking steps to become financial institutions, with Apple recently announcing its own “buy now, pay later” offer integrated with its Apple Pay functionality.

Another signal of change

As someone who studies how loans and new types of debt can affect vulnerable consumers, I see this move from Apple as a signal of yet another shift in the way we think and use money. We are accustomed to handling our financial decisions through a relationship with banks, institutions which are bound by local regulation and which have built consumer confidence over centuries by providing products and systems that promise reliability. security and (as like to say) helps customers “be good with money.”

In general, however, banks aren’t known for their convenience or great customer experience. Conversely, tech companies are in a global business of disrupting the status quo, delivering innovation that increasingly offers convenience to their customers, often bypassing regulations that set the conditions for local businesses.

Integrating our “bank” into the Apple ecosystem will likely provide consumers with a frictionless financial experience, thereby removing some of the complexity from our financial decisions. As a consumer this sounds incredible, and for many this innovation will be just a welcome step forward. However, when I think of many people I have interviewed in my research on predatory lending, I worry about the link between convenience and convenience.

Apple’s “Pay Later” joins a plethora of easy-to-access interest-free credit products that standardize the pocket money we don’t have and break the traditional complexity of having to apply to borrow money.

The complexity of finance

While we appreciate all the efficiencies offered by technological innovation, our personal finances may be an area where we would be wise to hold on to a bit of the complexity and friction that forces us to engage in the process. The complex and impractical processes that banks and lenders have in place to ensure that creditors adhere to the Responsible Lending Code and do their due diligence in assessing the affordability of a loan for a borrower, helping thus preventing borrowers from obtaining interest-free credit which they will eventually find very difficult to repay.

In my work on predatory lending, I have seen the harm that occurs when the convenience and simplicity of these credit products create an environment in which it is too easy for people to sign up as “customer”. From multiple creditors, sliding into vast amounts of debt due to the frictionless consumer experience.

Once they’re over their heads, however, they find that what works to get out is a lot like the hands-on, engaged budgeting methods that have served people well for generations. Not practical, but durable, requiring their focus and discipline.

As consumers, we are right to welcome innovations that make our lives easier.

However, we must keep in mind the reasons why these new services are offered to us and the trade-offs when we engage in innovation. We may need to become the friction that ensures that innovation does not cause us or those we love to go into consumer debt.

“Alapasita Teu is a researcher at the Maxim Institute based in Auckland. This story was sponsored by


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