Ann: Media Release, page-11

Highlights:
https://www.copyright link/companies/financial-services/afterpay-s-money-app-to-target-young-female-bank-customers-20210720-p58b6b

Afterpay hopes its transaction accounts will help drive more spending on its core buy now, pay later offering and down the track, it has plans to add investment and superannuation options.

Westpac, which is providing its balance sheet to Afterpay under a ‘banking-as-a-service’ deal, will pay Afterpay savers an interest rate of 1 per cent per annum.

The new app will allow users to set savings goals in up to 15 separate accounts and by notifying them about bills and spending, will seek to drive more use of its short-term credit product as a budgeting tool. Data from the transaction accounts will also provide Afterpay with a better view of customer risk.

It hopes the Money app can drive repeat usage higher, earning Afterpay more fees from merchants, who pay it around 4 per cent of the cost of goods sold.

Banks are watching Afterpay’s Money strategy like hawks, given the potential for Afterpay to lure customers away by offering them the ability to deposit their salary with Afterpay and use it for everyday payments.

In the future, Afterpay could refer customers to mortgages and provide options around investment and superannuation, although details on these plans have not yet been provided.

Banks remain concerned fintechs like Afterpay will be the ones that maintain customer relationships, forcing banks to serve as utilities that manufacture product in the background.The Afterpay Money strategy should reduce Afterpay’s operating costs. Afterpay currently pays credit card networks large fees, given its customers currently connect bank debit cards to the service.This requires Afterpay to pay Visa or Mastercard to process the four payments per sale over the card networks. Payment processing costs are Afterpay’s largest variable cost, $134 million in the 2020 financial year.But if customers directly link their bank accounts, transactions can be taken off the card networks.

Analysts also expect the banking strategy - which will begin in Australia, but could be rolled out internationally if Afterpay can find banking partners - to open new sources of revenue, including from rewards programs, such as cashback commissions.