“If the ride is more fly, then you must buy”: Commonwealth Bank joins forces with Snoop Dogg to take on Afterpay

Snoop Dogg

Commonwealth Bank (CBA) has decided to dip a $100 million toe into the buy-now-pay-later market, investing in Swedish Afterpay-rival Klarna.

The deal, announced yesterday alongside CBA’s full-year results, signals an impending step change in the local market, with a major financial institution set to take a seat on the pay-later gravy train.

Nine figures were only enough for about a 2% stake in Klarna — a company valued at $5.5 billion earlier this week, with established operations in Europe and North America.

But it was enough to secure CommBank status as Klarna’s exclusive partner when it launches in Australia and New Zealand.

While the company has no Down Under launch date yet, it has said it sees Australia as a big opportunity, while CBA chief executive Matt Comyn yesterday flagged the bank’s interest in ongoing investment in the service.

The bank joins American musician and entrepreneur Snoop Dogg as a shareholder in the company. Snoop picked up a small stake earlier this year when he agreed to lend his considerable brand power to Klarna’s marketing efforts.

Will we see Snoop Dogg buy-now-pay-later ads in Australia? There’s a distinct possibility.

All this is bad news for Afterpay, which has established itself as the dominant buy-now-pay-later provider in Australia, but is increasingly challenged by a growing number of competitor providers.

CommBank has considerable resources behind it though, and evidently recognises its exposure to the decline of traditional credit cards, catalysed by companies such as Afterpay.

Last year, rates of credit card ownership experienced their biggest year-on-year decline in 13 years, while, in contrast, buy-now-pay-later grew over 250% in the last three years, according to ASIC.

Commonwealth Bank also has access to a wealth of merchant data, picked up from years servicing small businesses across the country with point of sale and payments technology.

This raises the possibility the bank could help Klarna touch parts of the market Afterpay has found harder to reach — specifically, mum-and-dad retailers who aren’t necessarily technologically savvy.

What are the fees like? Similar to Afterpay, Klarna makes its money from merchants, enabling it to offer customers a free service.

Afterpay charges a 30-cent fee plus a commission, usually about 4%, to merchants, while Klarna’s rates vary by country, from a variable fee of 2.79% in Sweden to 5.99% in America.

NOW READ: Businesses welcome Afterpay inquiry: Should ‘buy-now-pay-later’ be regulated?

NOW READ: Afterpay’s growth skyrockets but scrutiny of ‘buy-now-pay-later’ platforms is set to increase

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Storewall Australia
1 year ago

Back end integration is key with these services. Some online stores don’t integrate with them (AfterPay) at the moment making it hard to implement manually. I would hope this model with CBA might be easier, or not.

Truth in Media
Truth in Media
1 year ago

Just goes to show what an evil service this is, when the king of scumbag music backs it!

Michael Ratner
Michael Ratner
1 year ago

So what’s changed? The Banks, who have every opportunity over the years to have created something of necessity and worth to their customers are now reactively muscling in on something they have an idea they can manipulate and spoil.
Well there goes what appears to be a welcome idea to pot.
Do people not realise that any bank involvement or initiative is clouded in mistrust.