The banking industry’s assault on the buy now pay later market is broadening with Suncorp set to launch an interchange-based offer with Visa from early November.
Suncorp is planning to issue a new debit card loaded with BNPL functionality that will be marketed as the “PayLater Visa debit card”.
Suncorp is the third Australian bank to launch a proprietary BNPL product following similar deals negotiated by CBA and Citibank with Mastercard earlier this year.
While there is some variation in the design of the products of each of the banks, they share two features likely to present a compelling challenge to monoliners such as Afterpay and Zip.
The potential killer feature of each of the bank-run programs is that they will be much cheaper for merchants to accept than the standard 4 per cent fee levied by Afterpay and others.
Suncorp, CBA and Citibank are likely to charge merchants a fee of up to 80 basis points of the value of a customer’s purchase, which is equal to the regulatory cap that currently applies to interchange on credit cards.
This could give merchants an incentive to offer price discounts to subscribers of bank-sponsored BNPL services over standalone schemes because the cost gap is large.
Suncorp highlighted the more favourable economics of its PayLater product to merchants in a press release on Monday.
“This solution is also a win for Australian businesses, many of whom are doing it tough right now as we learn to live with COVID-19,” the bank said.
“Our PayLater offering eliminates additional costs to those businesses who are currently paying millions of dollars in traditional BNPL fees.”
Suncorp and the other banks are also promising to conduct undertake comprehensive credit checks on customers before giving them access to their BNPL programs.
This is likely to magnify the bad debt pressures on the monoliners because the banks will only be encouraging creditworthy customers to sign up to their services.
That could leave Afterpay and Zip exposed to having to accept a larger share of customers with less ongoing capacity to settle BNPL debts.
The PayLater product will mark Visa’s first foray into BNPL in Australia, which could serve as a benchmark for similar product ventures with other banks.
“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,” said Julian Potter, Visa’s country manager in Australia.
“We’re excited to partner with Suncorp to deliver a seamless and secure digital payment experience that offers customers the convenience of paying in instalments anywhere Visa is accepted and enables more businesses across Australia to grow.”