Commonwealth Bank of Australia has officially stepped into the increasingly cluttered buy now, pay later (BNPL) sector this week, marking the first major bank to make a play against industry juggernaut, Afterpay.
Called StepPay, CBA’s offering will be available to it’s 4 million customers, with more than 86,000 having already pre-registered. CBA will start contacting customers this week to alert them to the new offering.
The move is expected be the first in a wave of retail banks rolling out their own versions of BNPL services in a bid to stop the flow of customers securing credit from the fintechs making a hugely successful play for bank customers.
CBA’s executive general manager Marcus Meneguzzi says: “We know BNPL is a popular choice among customers, but is hampered by its limited use and availability in only selected retailers and businesses. With StepPay, customers have freedom around where they’d like to stop, offering the same accessibility as our other CBA cards.”
With a sign-up process that takes less than five minutes to complete, StepPay marks CommBank’s first cardless payments offering. Eligible customers can start using it as soon as they activate it online, with a new card will be issued to their digital wallet on their mobile.
There will be no ongoing fees and no additional cost to businesses.
“StepPay is a win, particularly for small businesses who may be charged a high fee in order to offer BNPL to customers. With no additional merchant costs or integration costs, StepPay levels the playing field and allows businesses to better compete,” says Meneguzzi.
Payments can be used for purchases under $100, while purchases above $100 will be split into four equal instalments, without any cost to the customer. StepPay can be used anywhere Mastercard is accepted, with an initial limit of up to $1,000, with no ongoing fees.
CBA says it will prevent its customers from falling into the debt trap by blocking additional transactions if a payment is missed. Eligible customers will need to show evidence of regular income or deposits into a CBA transaction account to cover repayment instalments, and will be subject to internal and external credit assessments.
Customers that miss a repayment will face a possible $10 late fee, however, the bank says a number of caps will be in place to minimise late fees, including a daily limit of $10, an instalment limit of $10, a purchase limit of $20 and an annual limit of $120.
CBA’s fine print also reveals it will limit the number of customers taking up StepPay at the one time as it tests the new digital lending product. The big four bank will conduct responsible lending checks on customers ahead of extending credit.
BNPL transactions were up 90% in 2018-19, with an ASIC report revealing that missed payment fee revenue for all BNPL providers totalled $78 million in 2019, up 38% on 2016. That could have something to do with the fact that one in five consumers are missing payments.
Meanwhile, the soon-to-be-acquired Afterpay is stepping into big four territory as it prepares to launch a banking app. Called Money and backed by Westpac, it will allow Afterpay to distribute deposit products and debit cards.
Launching later this year, Afterpay Money will target millennial and Generation Z female customers, who are among Afterpay’s biggest cohort of users.