NAB announces buy now pay later service

Customers of NAB are able to pre-register for the major bank’s new buy now pay later service from today. If approved, they’ll get access to a service that NAB says will charge no account fees, no interest and no late fees.

The service, called NAB Now Pay Later, is expected to launch in July 2022, though an exact date has not yet been announced.

It will be the latest entrant into an already-competitive buy now pay later (BNPL) market in Australia where many of the players charge fees for late payments. But NAB said its decision to introduce the no-fee service was driven by a desire to give customers greater control of their money.

NAB’s Group Executive Personal Banking, Rachel Slade, said the bank’s research showed many of its customers were already using other instalment payment services, and NAB wanted to make this option simple and digital for them.

“It’s also safer than the alternatives as these are already our customers,” Ms Slade said.

“We know their banking and credit history and we’re assessing them based on our existing banking relationship.

“We know the way our customers are choosing to pay is changing and they’re demanding simple and easy to understand credit.”

However, Canstar’s money expert, Effie Zahos, said consumers need to be cautious with buy now pay later products, as they can lead to “dangerous spending behaviours”.

How do you get NAB Now Pay Later?

In order to get access to the NAB Now Pay Later, you must have an existing NAB transaction account. Registrations for the service are open now via the NAB website.

If approved, customers will be able to access a spend limit of up to $1,000 and split purchases into four repayments. The first of these will be made upfront at the time of purchase from a customer’s NAB transaction account, with the remaining three due fortnightly for six weeks.

NAB Now Pay Later will be accessible via the bank’s app as part of the digital wallet for online and in-person payments, and will be usable anywhere Visa is accepted. Customers will receive a virtual card with a revolving security number rather than a physical plastic card.

Not everyone will be able to access Nab Now Pay Later, and that could include anyone signing up from now for a new NAB bank account. While customers who pre-register before the service launches will receive first access to apply, approval is not guaranteed.

Instead, Ms Slade said NAB Now Pay Later applications would be subject to eligibility and credit assessments.

“Customers will be able to activate NAB Now Pay Later via their mobile, where a credit check will be completed,” she said.

“This will ensure customers can have the confidence to appropriately manage their repayments, both today and in the future.”

Calls for better regulation of the BNPL industry

The BNPL industry has copped criticism at times for the way it has managed to side-step much of the government regulation that applies to more traditional forms of credit, such as credit cards and personal loans.

Some providers have opted for self-regulation as part of a voluntary Buy Now Pay Later Code of Practice with the Australian Finance Industry Association.

The Australian consumer groups Choice (Australian Consumers’ Association) and the Consumers Federation of Australia, along with Financial Counselling Australia, have joined a global push by Consumers International for more regulation and the need for credit checks on BNPL services. The regulator ASIC’s Moneysmart website says that while BNPL can be convenient, any fees can soon add up, and it points to past ASIC research that found one in five people had failed to meet repayments on time.

Fees can vary significantly between BNPL services and some providers in Australia already say they do or will conduct credit checks on customers, including fellow major Commonwealth Bank on its StepPay service. Some non-bank BNPL providers such as Zip say they may conduct credit checks on applicants, although some others do not.

Dr Tracey West, an expert on personal finance at Griffith University, told Canstar she believed NAB’s model was preferable to many other BNPL services, especially due to the greater regulation and reporting obligations banks have in contrast to other finance companies.

“Banks will have better assessment and stress-testing practices in place when assessing applications,” Dr West said.

“The increased competition the banks bring to the market may reduce market share of the more predatory finance companies, hopefully reducing their presence over the long run.

“The regulation over finance companies has not kept pace with the growth in demand and debt spirals their clients get into.”

Canstar’s Editor-at-Large and Money Expert, Effie Zahos, said one of the biggest gripes people had about BNPL services was being stung by fees, so the NAB product was different in not charging any.

“It’s essentially a revolving line of credit that consumers pay nothing for, apart from the purchase cost,” she said.

“While this makes NAB’s offering stand out from the pack, a ‘free’ revolving line of credit can lead to dangerous spending behaviours, which may cause people to spend more and save less, so it’s important consumers are aware of this.”

How will NAB Now Pay Later compare to other BNPL services?

Many of the existing buy now pay later (BNPL) services in Australia also charge no account fees or interest on purchases, but some do charge for late payment fees. For example, Afterpay will charge a maximum of one $10 late fee for each order below $40 and potentially higher fees for more expensive purchases, while Commonwealth Bank may charge its StepPay customers late fees starting at $10.

To find out how NAB Now Pay Later will compare to other major BNPL players in the market, including Afterpay, ZipPay and Commbank StepPay, Canstar analysed the costs associated with making a $500 purchase, as well as the costs of missing a payment on a $150 purchase.

NAB Now Pay Later is one of only two services in this list that doesn’t charge late fees, along with PayPal Pay in 4, which could make it a cost-effective option compared to its competitors.

Buy Now Pay Later – $500 purchase

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Source: www.canstar.com.au. Prepared on 26/05/2022. Fees and/or payment terms based on a single purchase amounting to $500. *Balance due for that month is for purchases made in the preceding month. ^Only a single monthly fee will be charged regardless of the number of active payment plans. See providers for full details on eligibility, terms and conditions.

Cost of missing one payment on a $150 purchase

When looking at the cost of missing one $150 payment across several BNPL providers, analysis from Canstar shows NAB Now Pay Later and PayPal Pay in 4 customers would pay $0 in fees, making both of these services the most cost-effective options. On the other hand, the fact that both NAB and PayPal say they may carry out a credit check on applicants suggests that missed repayments could potentially impact your credit score, which is not the case with some competitors (such as Afterpay) that say they won’t report late payments.

Both Afterpay and CommBank’s StepPay customers would pay the highest percentage in fees, totalling 6.67% of the original purchase value after the first missed payment.

Cost of Missing One Payment on a $150 Purchase

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Source: www.canstar.com.au. Details correct as of 25/05/2022. Late fees based on a purchase amount of $150. *An additional $7 applies if a payment remains unpaid seven days after the due date. **Given 21 days to make payment before the fee is charged. ‘Cost if one payment late’ includes a single charge of one late payment fee and does not include any ongoing fees that may be applicable. See providers for full details on eligibility, terms and conditions.

More information on how the NAB Now Pay Later service will work is available on the bank’s website.

Cover image source: Piotr Swat/Shutterstock.com