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National Australia Bank (ASX: NAB) is hoping to reel in younger customers with its new no interest credit card, called the 'StraightUp' card, taking a punt at the booming buy-now pay-later (BNPL) sector.
The move is potentially a game-changer for NAB and sees the Big Four Bank take on Afterpay's (ASX: APT) BNPL product used by nearly 10 million people in Australia, the US and the UK.
In the red corner is NAB's 'StraightUp' Card. Technically a credit card, the product gives customers access to credit of up to $3,000 for a flat monthly charge and no interest payments.
Customers do not have to pay the monthly fee if the card is not used and if the balance of the card is $0, and there are no annual fees, no late payment fees, and no foreign currency fees.
In the blue corner is Afterpay with its now well-established fintech platform that allows customers to pay-off the costs of goods and services every fortnight for two months.
The platform charges uses a fee if payments are missed, but otherwise no interest payments are charged.
A similar model is used by BNPL competitors like Zip (ASX: Z1) and Flexigroup's (ASX: FXL) Humm.
However, unlike growing BNPL platforms, NAB's 'StraightUp' card can be used anywhere a credit card is accepted, so essentially anywhere in Australia and online. Established products like Afterpay, Zip and Humm can only be used if the merchant offers it to customers.
NAB's 'StraightUp' card actually holds similarities to another one of Flexigroup's BNPL products called Bundll.
Launched in February in partnership with Mastercard, Bundll allows users to buy products anywhere, interest freee, and pay the balance off on a fortnightly basis.
NAB group executive of personal banking Rachel Slade says the new product represents a completely new approach to credit.
"We started with a straightforward idea to create a card with no interest, no annual fees and no late payment fees," says Slade.
"This is the result a simple, easy to understand credit card that can be used anywhere Visa is accepted online or in store."
The only hook is that customers must pay off the minimum monthly payment, depending on what credit limit is entered into. For example:
- $1,000 credit limit: Pay $35 per month towards your balance ($10 monthly fee is included in your balance).
- $2,000 credit limit: Pay $75 per month towards your balance ($15 monthly fee is included in your balance).
- $3,000 credit limit: Pay $110 per month towards your balance ($20 monthly fee is included in your balance).
"Credit cards have not really evolved in recent years. But our customers' needs and expectations are changing and we want to change with them," says Slade.
"In the NAB StraightUp Card, we've created something completely different to every other credit card available today, with a simpler approach that makes it easy for customers to take control of their finances."
Following NAB's announcement shares in Afterpay and Zip are relatively steady, unlike the market's response to PayPal announcing it was jumping into the BNPL space two weeks ago.
PayPal's new BNPL offering will be a direct competitor to both Zip and Afterpay's model, giving customers the option to delay payments for purchases of between $30 to $600, repayable in four instalments over six weeks.
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