Commonwealth Bank has made a bold buy now, pay later play over the Christmas period, paying merchants a 4% commission for sales using its new StepPay BNPL card in November and December 2021.
The bank’s business customers will receive 4% of the total value of any in-store or online transaction that is processed using a CommBank terminal and StepPay card, and settled in a CommBank Business Transaction Account.
Throughout the two-month offer, merchants can earn up to $5000 in total rebates.
Eligible merchants will automatically be signed up to the offer. They will be informed of how much they have earned through the scheme — and paid — within 45 days of the offer ending.
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For merchants that already have a CommBank account, there are no additional fees, and no additional set-up required. Any merchant that can currently accept Mastercard payments will be able to accept StepPay payments.
CommBank is planting a BNPL flag
Speaking to SmartCompany, Brad Kelly, managing director of payment consulting firm Payment Services, says this is CBA “attacking” Zip and Afterpay, stating its position and planting a flag to show it has a role to play in the BNPL scene.
The move to offer payments instead of charging fees comes in stark contrast to the typical BNPL model.
Zip and Afterpay charge merchants between 3% and 6% of the value of each transaction, and controversial ‘no-surcharge’ rules prevent them from passing those costs on to the consumer — although the RBA last week recommended outlawing such rules.
If CommBank merchants are saving 6% and gaining 4%, that’s actually a 10% net benefit, Kelly notes.
This is also a “pure card play” from the bank, offering something quite different to the Zip and Afterpay model.
It is using its card issuing power, its relationship with Mastercard, its huge customer base and its deep pockets to take the fight to the fintechs.
“CBA has the biggest merchant base and the biggest client base in the country,” Kelly says.
“So they’re weaponising it.”
For existing CBA merchants, there’s genuinely no downside here, he muses.
“It’s Happy Christmas, literally.”
Keeping merchants and millennials on board
Earlier this year, CommBank also invested $30 million into Little Birdie, offering its merchants access to the marketplace headed up by Catch Group’s Gabby and Hezi Leibovich.
Zip and Afterpay have done a great job of popularising BNPL products. Now, the banks are in a position to offer a better option to both merchants and consumers, and to regain that millennial customer base.
“Banks are not letting their millennial customers go quietly,” Kelly says.
Millenials are “not very loyal”, he notes. As customers, they’re tough to attract and tough to keep.
In tough times, merchants are similar. While BNPL providers may talk up their love for their merchants, that’s not enough. At the end of the day, it comes down to the numbers, Kelly says.
“In my 30 years of banking, if you give a merchant the choice between a 4% rebate or a 4% fee, I can tell you which one they’re going to take.”