Commonwealth Bank is launching its own Buy Now Pay Later

We all know Commonwealth Bank is doing everything they could to push its appeal to younger customers. Technology will change the way we handle our personal finances and CBA echoes this sentiment entirely. 

In the past four years, Australia’s largest bank has quietly assembled a pretty ace team of  data scientists, neuroscientists and psychologists to help inform their product development and marketing to Millennials. This is rather exciting! 

Last month its new neo credit card offering was a big hit with this age group. The interest-free card offered at limits of $1000,$2000 or $3000 with a monthly fee varies between $12-$22 depending on the credit limit. 

And from mid 2021, CBA will begin rolling out another innovation in payment technologies similar to Afterpay to its customers. 

How does it work?

CBA’s Buy Now Pay Later offering can be used anywhere debit and credit card payments are accepted. It is a digital card that can be added to your CommBank app or digital wallet on your phone. It links to your CBA bank account with no ongoing fees and at no extra cost to businesses beyond the standard merchant fees of slightly more than 1%. 

The digital product will enable customers to make purchases between $100 and $1000. For any purchase under $100, the full amount will come out of your account in one go. A purchase over $100 will require the input of a pin and be divided into four equal fortnightly instalments. You pay by tapping just like a contactless payment. 

To be eligible, CBA customers need to show evidence of a regular salary deposited into their transaction account to cover repayment instalments. They will be charged a late fee of $10 which would be capped at $120 over a year. 

What’s the catch?

Believe it or not, Buy now pay later is so popular with the millennial crowd. Based on Roy Morgan research from late 2019, Australians between the ages of 14-34 account for 55.9% of BNPL users with those in the 25-34 range making up 33.5%. This is only 18% of Australia’s population. 

This ease of payments and a focus on technology could be the key driver for the growth of BNPL. Services like Afterpay or Zip actually help with budgeting, helping people split the large purchase into smaller, more manageable payments. Paying something in installments might actually be more beneficial than paying 100% upfront, especially for people with uneven cash flow. People don’t have to wait to have the full amount of money to purchase a new fridge when their fridge breaks down for example. 

People demand for more control and simplicity. For some, words like ‘interest’, ‘credit score’, ‘loan’ can put them in snooze mode. That’s why Banks like the CBA are trying to offer the frictionless and simple experience to help young people manage in a world that has become more complex. BNPL acts like a personal trainer motivating people to stay in shape. 

We also need to point out that there is a general trend away from credit cards. RBA’s data shows credit ca