(17 March 2021 – Australia) Commonwealth Bank of Australia has entered the competitive buy now, pay later market, competing with local juggernaught Afterpay, and Klarna, in which it has invested $350 million.
Set for roll-out to its customer base of four million consumers in mid-2021, CBA's product will undercut Afterpay by not charging merchants more than their current card transaction fees to accept instalment payments.
Afterpay and other BNPL providers charge merchants around 4 percent. BNPL fees are costing Australian businesses hundreds of millions of dollars a year, says CBA's group executive, retail banking services Angus Sullivan.
“We know transaction costs are important considerations for businesses. Unlike some other BNPL providers which may charge a high fee, there are no additional fees to businesses when customers choose to pay with CommBank’s BNPL,” he says.
Available for all transactions between $100 and $1,000, payments are split into four instalments payable each fortnight. Eligible customers will be able to apply for the product where they show evidence of a regular salary deposited into a CBA transaction account which can cover repayment instalments and will only be available to customers following internal and external credit assessments.
Customers who are seen to be struggling with repayments from other BNPL players will also be blocked from using the service. Again, this is a step change from Afterpay, which only uses its own algorithms to assess customer risk on every transaction and does not carry out credit assessments.
While CBA has gone their own way, rival Westpac has partnered with Afterpay with the aim of providing bank-like services through Westpac's new banking-as-a-service platform.
As for CBA's much-trumpeted relationship with Klarna, the new product will provide an added element of competition.
“Our new BNPL service complements and underscores our investment in Klarna and our joint venture business here in Australia which offers both CBA and non-CBA customers huge opportunities to connect with domestic and international retailers,” says Mr Sullivan. “Our latest investment in the company is an expression of our confidence in its future both worldwide and in Australia and New Zealand.”