MELBOURNE (CU)_Over the recent years, buy now, pay later schemes have become increasingly popular among Australians, particularly after consumers were forced to rely on only shopping amid the COVID-19 pandemic. However, BNPL operators have attracted criticism from consumer advocates over the requirement of minimal credit checks, which have left vulnerable customers in a debt spiral as the cost of living goes up. Standalone operators in the BNPL market will now face additional pressure, as another major lender in the country begins to offer a buy now, pay later product to customers.
The Australia and New Zealand Banking Group (ANZ) and the Commonwealth Bank of Australia (CBA) were already offering a BNPL service, when National Australia Bank (NAB) decided to join its competitors, with the NAB Now Pay Later product, leaving Westpac as the only one of the big four not offering such a product.
NAB customers can access the bank’s new BNPL product from July, using the lender’s existing Visa credit card system. This would mean that it does not require merchants to sign up, as is the case with standalone operators like Afterpay and Zip. Customers who pass a credit check can enjoy NAB’s new product which would allow them to spilt purchases of up to $1,000 into four payments. Another major benefit is that interest, late fees or account fees will not be charged by the bank for this service.
Accordingly, the Melbourne-based financial service provider will be putting additional pressure on standalone operators in the BNPL market, in which a number of players in Australia have seen losses shrink and share prices plunge. According to experts, banks have a huge advantage in the industry, since they can leverage their big debit and credit card businesses to target BNPL customers, while rising interest rates also make it difficult for BNPL operators to borrow money to keep their businesses going. “They [banks] also have huge muscle and can ride out the increase in funding costs,” Grant Halverson, the managing director of consultancy McLean Roche, said.
