CBA to take on Afterpay as it joins buy now, pay later stampede

The Commonwealth Bank will take on market darling Afterpay directly by joining the rush into the booming buy now, pay later (BNPL) sector from the middle of this year.

The banking giant on Wednesday said it would launch a product allowing its customers to make purchases between $100 and $1000, and repay the money in four interest-free fortnightly instalments.

CBA group executive Angus Sullivan said customer needs were evolving and there was strong demand for a BNPL service.

CBA said it would perform credit checks on all of the customers before allowing them to take out the product, after it noticed people who were struggling with debt during the pandemic had in some cases used multiple BNPL services.

In a sign of the pressure the bank’s move could put on BNPL margins, CBA said it would not charge any extra fees to merchants beyond standard merchant fees of slightly more than 1 per cent of a transaction’s value.

In comparison, CBA said retailers on average paid about 4 per cent for BNPL services, which were costing businesses hundreds of millions of dollars a year in fees.

“Customer needs are evolving and this new BNPL offering is about giving customers more choice around how they choose to pay and when, depending on the option which suits them best,” the bank’s group executive for retail banking, Angus Sullivan, said.

The service is in addition to CBA’s partnership with Swedish BNPL business Klarna, in which CBA also holds a 5 per cent stake.

More to come

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