Apple has reportedly scrapped a plan to create a new “subscription” service for iPhones. According to the report, the alleged iPhone subscription program had been in development for at least two years and was designed to allow customers to keep upgrading to a new model every year, while ensuring a steady stream of revenue for the Cupertino company. The company’s Apple Pay division was reportedly responsible for the project, along with its “Pay Later” program, which was also scrapped.
The iPhone subscription service has been in development since 2022:
Bloomberg’s Mark Gurman reports that Apple has halted efforts to launch an iPhone subscription service, a project that would have offered a new iPhone model to customers who paid an annual subscription fee to the company for the company’s latest devices.
The subscription system was supposed to work in a similar way to the current iPhone upgrade program or monthly installment plan via the Apple Card, but with the subscription managed directly through an Apple account using the payment methods already associated with it.
Apple was hoping to increase its recurring revenue by encouraging users to upgrade more frequently. But the project faced similar regulatory challenges to Apple Pay Later, as it would have required the company to be subject to the same regulations that govern credit card companies.
The service would also have impacted Apple’s relationships with telecom companies that already offer similar installment plans to consumers.
The project has faced multiple delays since its inception two years ago and was expected to be introduced by the end of 2022, but multiple setbacks pushed the service back by more than a year, according to the publication.
The company was also reportedly concerned that the project would face scrutiny from the Consumer Financial Protection Bureau (CFPB), which has previously said that companies offering “pay later” services must adhere to regulations that apply to companies like Visa and Mastercard.
Apple already offers an “iPhone Upgrade Program” in the US that allows users to pay for a new iPhone over two years, and the now-cancelled iPhone Subscription Project is expected to replace that program, according to the report.
The iPhone has already become Apple’s biggest revenue contributor, accounting for just over half of its total sales in the previous fiscal year, according to the company’s reports, and the subscription program would have ensured a steady stream of revenue for the iPhone maker, while preventing customers from switching to other smartphone brands.
This is Apple’s second payment-related venture to close in 2024. In June, Apple announced that it would be ending its Pay Later service, which was created in partnership with Goldman Sachs and Mastercard to compete with US fintech firm Affirm.
The Pay Later service was introduced a year ago and allows customers to make purchases of up to $1,000 and pay them off in four installments, the report added, and Apple could still revive its iPhone subscription business by working with a new partner.