Apple a Consumer Credit "Pioneer" in China With New Payment Plan

Apple China Consumer Credit Payment Plan

Apple has partnered with China Merchants Bank to offer Chinese customers affordable payment plans for purchases made at the Apple Store, Bloomberg reported Wednesday. Although the country has a fast-moving economy, Apple’s premium-priced products remain out of reach for many potential Chinese customers, and Apple hopes that simple payment plans, still a novel concept in the country, will help reach a new demographic of consumers.

Apple is known for its premium products that often hit the wallet harder than those from competing companies. In still-developing nations like China, however, this can severely limit Apple’s potential market. According to Bloomberg, the iPhone 5’s starting price of 5,288 yuan (US$850) is equal to about six weeks’ pay for an average urban worker. Even worse, MacRumors points out that the junior level workers who manufacture most of Apple’s products only make about 1,800 yuan (US$285) per month, putting purchases of the products they make out of reach.

“There is an enormous mid-range consumer market that they are not tapping into,” Mark Natkin, managing director of Marbridge Consulting Ltd., a Beijing-based market research firm, told Bloomberg. “They’re trying to figure out how to make products more accessible to that market segment. This is a good step in that direction.”

Apple hopes to address this problem through a joint promotion with China Merchants Bank Co., which gives customers the option of splitting payments into 3, 6, 12, 18, or 24 installments. As an introductory offer, all payments with 12 or fewer installments are interest-free, and the 18 and 24 month installment plans carry an interest rate of 6.5 and 8.5 percent, respectively.

While installment payment plans are nothing new in most parts of the world – Apple has long offered interest-free payment plans in the U.S. via a partnership with Barclaycard – Apple’s introduction of the system to China is interesting in that it will be one of the few companies to directly market credit to its consumers.

"Financing is traditionally the best route to make expensive luxury items affordable to those unable to save the cash for them, and if Apple pulls it off it will be a pioneer in consumer credit in China,” David Wolf, a managing director for market consultant firm Allison+Partners in Beijing, told Bloomberg.

China is a top priority for Apple, as recently revealed by the company’s CEO Tim Cook; Mr. Cook expects the Chinese market to top the U.S. as the company’s busiest and most important in the coming years. In a nation where the average monthly wage is 3,585 yuan (about US$575), however, only options such as this new payment plan will help expand Apple’s reach.

Teaser graphic made with help from Shutterstock.

[via MacRumors]