Milford Asset Management investment analyst Roland Houghton said CBA’s move into BNPL may well be followed by other banks, which could put downward pressure on merchant fees. Even so, he said Afterpay had a strong brand in Australia and it would argue to merchants that it provided extra services beyond payments, such as customer leads.
“I think Afterpay’s brand equity domestically will protect it quite a lot. I think it’s some of the smaller players that will be most at risk,” he said.
Morningstar analyst Shaun Ler said the entry of big banks into BNPL would drive down margins in the long term, but Afterpay had more engagement with customers and provided more “value-add” to merchants. ”I don’t see the big institutions just destroying them,” Mr Ler said.
The service is in addition to CBA’s partnership with Swedish BNPL business Klarna, in which CBA also holds a 5 per cent stake. Mr Sullivan said there could be competition with Klarna “on the margin” but the bank was keen to have “more than one iron in the fire” as BNPL services surge in popularity.
CBA will charge a late fee of $10, which it said would be capped at $120 over a year, and it would not allow the BNPL offering to be used for cash advances or spending on gambling.
Afterpay did not comment on CBA’s move, but co-chief executive Anthony Eisen last week responded to news of PayPal’s move into BNPL by saying it had always faced competition.
“We’ve had it since day one, obviously, there’s more people coming to our space, because it’s been illustrated to be so fundamentally important to this next generation,” Mr Eisen said.
A Zip spokesman said: “This is great validation for our sector. We welcome competition because that delivers better services and products to consumers, and that’s what Zip is about.”
Afterpay shares initially dipped after CBA’s announcement, but ended the day 1.1 per cent higher at $112.99. Zip shares fell 1.8 per cent to $8.59. Meanwhile, CBA shares ended the session flat at $87.11.
With Colin Kruger
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