The launch of an Apple card in the UK, a new buy-now-pay-later product, or a speculative land-grab or “acquihire”? AltFi investigates the motivations behind Apple’s newest acquisition.
Apple’s acquisition of Credit Kudos – a UK startup that uses bank data to help businesses to make lending decisions – for an alleged $150m has sent tongues wagging across the industry in speculation.
In classic Apple style, the motivations behind the acquisition have been kept under wraps, with little noise even around the acquisition itself, which was first reported by The Block on Wednesday.
Apple’s track record in acquisitions is prolific. CEO Tim Cook indicated in February last year that the company’s rate of acquisition was around one company per month.
Historically, Apple’s purchases have been quietly absorbed into the tech giant’s machine without explanation. Operations of the acquired company typically go silent and their brand presence is wound down.
“Apple has a habit of acquiring something and then going silent for two years. Expect the same here,” says Simon Taylor, co-founder of 11-FS.
“The acquisition of Mobeewave now allows Apple to accept payments via iPhones without a separate terminal. Go look at the gap between the acquisition and product launch.”
An obvious exception to this trend was Beats, the headphone manufacturer that Apple acquired in 2014 and maintained the brand – likely due to its well-established profile and loyal customer base.
Weather app Dark Sky was another outlier in this regard. Though acquired by Apple in 2020, Dark Sky’s services have remained accessible via its iOS app and website and will continue to be available until the end of 2022.
The update about Dark Sky’s ultimate shutdown deadline came at the same time as news from Apple that a new weather feature would be coming to iOS 15. Coincidence? We think not.
Given the secretive nature of previous acquisitions, several theories are now circulating around Apple’s intentions for Credit Kudos. While these remain unconfirmed, AltFi has spoken to a few industry insiders to get their opinions on the move. Here are the top 3 theories:
This is one of the most likely possibilities, according to an industry insider. Apple recently launched its credit card in the US, in partnership with Goldman Sachs, and is rumoured to be eying launch in the UK soon.
Given Credit Kudos’s specialism – in providing a rapid alternative to traditional credit scoring via open banking methods – it is possible that Apple wants to bring its services in house to support the launch of its new product in the UK.
Taylor believes this could be possible, though highlights cost as a potential snag to this theory.
“A few folks have suggested this could be a way to launch Apple Card (or path to Apple Card) in the UK,” he says.
“The idea being lower-income segments would be worthy of an Apple Card. This is no doubt a possibility, but it's also an expensive market entry for what could have just been a partnership with an issuer like they did in the US.”
Rumours have been circulating around the likelihood that the Credit Kudos purchase may be linked to Apple’s ambition to enter the ‘buy now pay later’ market.
The Times reported that it is “likely to accelerate [Apple’s] move into payments and technology products such as “buy now, pay later” – something which Taylor too believes is a credible possibility, given Credit Kudos’ open banking expertise.
“I've been convinced that Open Banking is the key to BNPL,” he says. “Instead of forcing consumers to do a full credit pull just to buy a $50 jacket, why not quickly check their affordability and credit worthiness directly from their bank account? Credit Kudos immediately provides that capability to Apple.”
Another possibility, which would fit with Apple’s previous tendencies, is that the acquisition was motivated by a speculative land grab, both of market niche and employee talent.
Acquirees’ technology is often then incorporated into Apple’s own products; as was the case with PrimeSense, a 3D sensing technology provider whose product allegedly contributed to Apple’s Face ID.
Apple tends towards smaller companies, without a hugely established public profile, with an ostensible objective of strategic hiring of staff or expertise.
Whatever Apple’s motivations, one thing is certain: the acquisition will not have been in pursuit of any whimsical commercial foray.
“Apple doesn't dabble, it's very deliberate,” says Taylor.
Given neither Apple nor Credit Kudos responded to our questioning, we may have to wait a few months before our suspicions are confirmed or denied.