CommBank vs. Afterpay – The showdown

It was only a matter of time before the big four banks joined the buy-now, pay-later (BNPL) party. CBA recently unveiled its new BNPL offering. It can be used anywhere that debit and credit card payments are accepted and will start its rollout to eligible CBA customers from mid-2021.

CBA says: “the new BNPL links to a CBA bank account, with no ongoing fees and at no additional cost to businesses. Customer needs are evolving and this new BNPL offering is about giving customers more choice around how they choose to pay and when, depending on the option which suits them best.”

In a similarly surprising move, Afterpay is preparing to launch a mobile banking app called Afterpay Money, that will focus on the CBA’s (and the other three major banks’) army of lucrative and loyal customers. The market expects Afterpay’s app will be very different to what CBA has on offer.

The battle has only just begun

The CBA offering is similar to Afterpay’s four-instalments payments split. Here is a table outlining some of the key features of CBA’s BNPL platform:

Accepted everywhere is that the CommBank app is the first of the big four to launch a BNPL service that poses a significant threat to Afterpay. Not only does CBA have a massive customer base, but it has the power to undercut Afterpay with regard to fees.

CommBank’s BNPL offering will, however, apply robust criteria to approve customers based on specific eligibility and credit assessments. Integrated all in one app, CBA will be the first of its peers to offer a total solution, both banking and BNPL, to work alongside existing accounts to manage a customer’s finances more easily in one place.

One of the benefits that Afterpay does have over CBA is the lack of banking regulation compared to CBA. Afterpay doesn’t require a credit check whereas CBA does, and its product is a credit classified product. This effectively enables Afterpay clients to use credit without incurring interest costs such as credit cards. CBA has however said that it will undercut Afterpay, with regard to credit and debit surcharges but Afterpay does have one thing on its side.

Millennials

This cohort has a negative view of banks and collectively, is likely to stick with what it knows. So, while it’s a great move by the CBA, it could be an uphill struggle to get millennials on-side, despite having a massive customer base to which to market its new product. While CBA has the total banking solution, Afterpay has first-mover advantage, and it won’t be long before it has the total banking solution together with lending.

Ishan Dan

Ishan is an experienced journalist covering The Inside Investor and The Insider Adviser publications.