Suncorp’s banking boss Clive van Horen says a decisive shift in how younger people choose to access credit has pushed the regional lender to jump into the booming buy now, pay later (BNPL) sector.
The bank on Monday became the latest financial institution to launch an Afterpay-style product, as BNPL services become increasingly common, threatening to crunch margins in the sector.
Mr van Horen, the chief executive of Suncorp Bank, said the lender believed there would remain strong demand for credit cards, but at the same time many younger people were opting for BNPL products.
“It’s not dissimilar in some ways to someone having an overdraft on their normal everyday account, however, it’s got the very clear repayment profile,” Mr van Horen said in an interview.
“I think it’s just a big shift in the way that, especially younger customers, like to spend and access credit,” he said.
Through a partnership with Visa, Suncorp will offer short-term interest-free loans of up to $1000, which would be quickly approved through an app, and must be paid back over four fortnightly instalments. The BNPL product, which includes a physical Visa debit card, can be used wherever Visa is accepted globally. The bank will cap late fees at $10 per purchase, and customers will have a two-day grace period for missed repayments.
As many young people ditch credit cards, Visa and other card giants are also looking at opportunities in BNPL. Visa’s country manager for Australia, Julian Potter, said: “The Buy Now, Pay Later sector is rapidly evolving as consumers increasingly look for flexibility and choice in the way they pay, both in-store and when shopping online.”