The anticipated launch of Commonwealth Bank of Australia’s buy now, pay later product, StepPay, in early August could herald a new wave of highly credentialled retail banks starting to compete across the buy now, pay later [BNPL] sector.
One of the first symptoms of this new competition could be lower merchant fee margins, according to one of the country’s top-rated banking analysts, Brian Johnson, at Jefferies.
Jefferies banking analyst Brian Johnson said an early August launch for StepPay could be comparable to Aussie Home Loans entry into the mortgage market in the 1990s. Peter Braig
Today’s leading BNPL players like Afterpay and Zip Co charge merchants fees around 4 per cent per transaction, with CBA’s StepPay set to offer merchants no fees beyond standard credit card transaction processing fees around 1 per cent.
Mr Johnson said an early August launch for StepPay could be comparable to Aussie Home Loans entry into the mortgage market in the 1990s, which prefaced a dramatic and permanent drop in mortgage margins for incumbent lenders.
Jefferies said StepPay will boast 30 per cent of the Australian population already engaged via the CBA banking app’s 7.5 million accounts. The linking of the StepPay product to a CBA transaction account will also solve any know-your-client risks for CBA in offering the product, with the transaction account data used to assess credit risk.
.
.
CBA’s StepPay product will exist on a virtual MasterCard and be offered at every merchant where MasterCard is accepted.
.
.
On a $100 transaction CBA will earn 80¢ on a BNPL MasterCard, 5¢ on a MasterCard debit card and 2¢ on an electronic funds transfer at point of sale (eftpos) routed debit card for the same transaction, according to Mr Kelly.
“Say you’re a Commonwealth Bank customer and you use that [BNPL] card at an ANZ terminal, ANZ pays the Commonwealth Bank interchange. Now, that’s opaque to the customer and the maximum they can charge is 80 basis points,” Mr Kelly said.
“My view is Commonwealth Bank wants to flip everybody to the virtual [BNPL] card and Apple Wallet. They want to make more money out of the same transaction. So essentially, they’re offering credit to debit card customers and it attacks Afterpay because it makes them irrelevant as Afterpay is only available at Afterpay merchants and this will be available almost anywhere in the world.”
(20min delay)