Commonwealth Bank (ASX: CBA) is upping the ante on its competition with Afterpay (ASX: APT) and Zip Co (ASX: Z1P) in Australia with the launch of a new buy-now-pay-later service that will run separately to its venture with Swedish fintech giant Klarna.
The service will be linked to CBA bank accounts with no ongoing fees or additional cost to business, with a roll-out expected in mid-2021.
The BNPL offering will be available anywhere Mastercard payments are accepted with a limit of $1,000.
"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," says CBA's group executive for retail banking services, Angus Sullivan.
"When making a payment, customers will have additional flexibility to use it for their everyday spending for smaller purchases as well as split over four instalments to help smooth payments for bigger purchases.
"Additionally we know transaction costs are important considerations for businesses. Unlike some other BNPL providers which may charge a high fee, there are no additional fees to businesses when customers choose to pay with CommBank's BNPL."
CBA highlights the average BNPL costs businesses around 4 per cent per transaction, leading to hundreds of millions of dollars per year. However, it claims the CommBank BNPL won't involve any additional fees above standard merchant service fees.
The new BNPL offering was developed after research showed 76 per cent of Australians who currently use BNPL are interested in using a BNPL service offered by their main bank.
The research showed users feel a bank-provided BNPL service would be more secure and reliable.
The group says its BNPL will apply robust criteria to approve customers based on specific eligibility and credit assessments.
"As the leading digital bank in Australia, we believe we are best placed to offer our customers a prudent and responsible BNPL option based on the trends and insights sourced from real time transaction data over many years," says Sullivan.
"We are excited to announce the first BNPL offered by a major bank which will give customers access to cash flow in a way that meets their changing preferences and expectations."
The move follows CBA's forays into the space in August 2019 through a partnership with leading global payments provider Klarna, in which it committed an investment of US$100 million as Klarna's exclusive partner in Australia and New Zealand.
"Our new BNPL service complements and underscores our investment in Klarna and our joint venture business here in Australia which offers both CBA and non-CBA customers huge opportunities to connect with domestic and international retailers," says Sullivan.
"Klarna Australia has experienced strong growth since its launch just over a year ago and we are delighted with its success to date.
"Our latest investment in the company is an expression of our confidence in its future both worldwide and in Australia and New Zealand."Never miss a news update, subscribe here. Follow us on LinkedIn, Instagram and Twitter.
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