Speculation is mounting that Commonwealth Bank is finally about to launch its proprietary buy now pay later service.

An announcement on the BNPL platform - to be marketed under the StepPay brand - is expected this week, according to industry sources.

StepPay and other proposed interchange-based BNPL programs such as Citi’s Spot platform pose the biggest threats to the dominance of Afterpay and Zip because merchants will incur significantly lower charges for accepting BNPL payments.

CBA will operate StepPay as a credit product through a virtual Mastercard and merchants are likely to incur service fees of up to 0.8 per cent of the value of consumer purchases.

That is much lower than the standard four per cent fee currently levied on merchants by Afterpay for BNPL transactions.

Both CBA and Mastercard are hoping that the fee differential will give merchants a big incentive to accept StepPay instead of the more expensive services offered by BNPL monoliners.

CBA confirmed in March that StepPay would be funded out of the existing standard merchant fees that it and other acquiring banks charge businesses for accepting card-based payments.

StepPay will operate as a digital-only card that can be downloaded to the cardholder’s CommBank app or digital wallet on a smartphone.

The virtual card can be used make over-the-counter purchases or shop online with retailers that accept Mastercard.