Last week, CBA announced its own version of a buy now, pay later (BNPL) system in bid to take on the likes of Afterpay and Zip in the lucrative credit sector.
CBA said in a statement that changing consumer demand inspired it to launch its own BNPL service from mid-2021.
Commbank said the industry standard for BNPL services is 4 per cent merchant fees to sales, with the major bank saying it will not charge an additional fee for businesses who accept the payment.
According to Datt’s Capital’s managing director and CIO, Emanuel Datt, Commbank’s second foray into the BNPL sector, following its bid in 2019 through Klarna, is also likely to be unsuccessful.
“The launch of Commbank BNPL appears to be a blunt admission that Klarna’s product has failed to gain traction in the local market. A cursory glance at the product design for Commbank BNPL reveals several fatal flaws that will almost certainly lead to the same outcome as Klarna locally,” he said.
According to Mr Datt, the sector has boomed with consumers swapping traditional credit to BNPL products. He highlighted that this change was driven by customer supply, with the big four bank likely to make the same mistake with its latest product as it did with Klarna.
“Commbank BNPL fails in the sense that it focuses too heavily on the supply (merchant) side of the equation without any compelling proposition for the customer themselves,” he said.
“As a CBA executive is quoted saying, ‘We are going to treat it like it is credit’. CBA has stated that it would conduct credit checks and would block customers if they were in arrears with other providers. This is in addition to higher proposed late fees than currently charged by Afterpay.
“This level of intrusiveness and friction on the demand side, coupled with the lack of lead generation tools on the merchant side, leads us to conclude this proposed product will be just another commoditised fringe BNPL product unlikely to capture significant market share,” Mr Datt explained.
He also pointed out that Commbank’s BNPL launch follows Afterpay’s announcement during its half-year results that it was taking on the banks in traditional banking products.
The payments giant is preparing to release a banking app named Afterpay Money, which would run in direct competition with Commonwealth Bank.
“We are not building another ‘me too’. There are some functions, like capturing a deposit and making payments, that are the same. But the experiences we build around that will be nothing like a bank, or a neobank, would do,” Afterpay executive Lee Hatton told the publication.
Mr Datt believes Afterpay will launch another product directly competing with CBA’s AdvancePay – a short-term payday lending facility.
“There is no question that the Afterpay brand is more highly recognised and respected among a broader swath of society than CBA.”
“We consider Afterpay’s BNPL offering to be the platform upon which additional financial services can be offered, and it appears as though this forecast is coming true. Afterpay has commented that future product launches will not be interest-bearing, in line with its ethos of monetising its services from the supply side,” he concluded.
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