What is CommBank BNPL and how does it compare to other options?

Commonwealth Bank is launching its own buy now pay later offering from mid-year, announcing that eligible customers will be able to split payments over six weeks. Here’s an overview of how it will work, the fees to watch out for and how it compares to some of the biggest buy now pay later players in Australia.
CommBank BNPL
Commonwealth Bank is launching a buy now pay later service. Image source: myphotobank.com.au, Shutterstock.com.

Commonwealth Bank (CBA) is the first major bank in Australia to announce its own buy now pay later offering – it’s called CommBank BNPL.

The service is set to take on the likes of Afterpay and Zip, as well as US payments giant PayPal, which recently announced it will launch a buy now pay later service of its own in Australia.

It also follows the December launch of CBA’s first no-interest credit card, which was dubbed an alternative to buy now pay later.

Interestingly, CommBank BNPL will be offered side-by-side with Klarna, which is still available in the CommBank app. CBA has part-owned the Australian arm of buy now pay later business Klarna since its launch just over a year ago.

The bank announced on Wednesday that its new buy now pay later service would launch in mid-2021 for eligible customers with a CBA bank account.

Here are the key details we know so far. We’ve also crunched the numbers to see how CBA’s offering could stack up on late fees compared to some of its largest peers.

What is CommBank BNPL and how does it work?

CommBank BNPL will take the form of a digital card that customers will be able to add to the CBA mobile app or their digital wallet and use anywhere Mastercard is accepted. It will be available for purchases between $100 and $1,000, with payments split into four instalments each fortnight and charged to an eligible CBA bank account. Payments under $100 will be charged upfront in one go, like an ordinary purchase from a transaction account.

CBA says there will be no ongoing fees or foreign transaction fees for customers, and businesses won’t have to pay any additional merchant fees above what they already pay for customers to pay with a CBA debit or credit card. This is a point of difference from several other buy now pay later providers, including Afterpay, where merchants are typically required to pay a certain amount per transaction when a customer pays with the service.

CBA will charge a late fee of $10 per missed BNPL instalment, although this will be capped at $120 per year.

Will there be a credit check?

Yes, CommBank’s BNPL product will only be available to customers who pass internal credit assessments and external credit checks, according to CBA. The bank said it would apply “robust criteria” to approve customers based on specific eligibility and credit assessments. For instance, it said eligible customers would be able to apply for the product “where they show evidence of a regular salary deposited into a CBA transaction account which can cover repayment instalments”.

How does CommBank BNPL compare to Afterpay, Klarna and Paypal?

Our research analysts crunched the numbers on a hypothetical $500 purchase and found CommBank BNPL had a similar fee structure to PayPal’s Pay in 4 service, whereas Afterpay and Klarna generally charged higher fees for late payments. There are no fees charged by any of the providers if payments are made on time, but in this scenario the fees potentially increase as payments are missed and as a customer’s repayments are received further and further away from the original due date.

Potential late fees on a $500 purchase

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Payments history Afterpay CommBank
Klarna PayPal
Pay in 4
Pay on time $0 $0 $0 $0
Miss one payment,
repay 5 days after
due date
$10 $10 $15 $10
Miss one payment,
repay 10 days after
due date
$17 $10 $15 $10
Miss two payments,
repay 5 days after
due date
$20 $20 $30 $20
Miss two payments,
repay 10 days after
due date
$34 $20 $30 $20

Source: www.canstar.com.au. Prepared on 17/03/2021. Disclaimer: PayPal’s and CommBank’s products are not available yet. PayPal Pay in 4 will be rolling out in June 2021 and CommBank BNPL will be available to eligible customers in mid-2021.

Why the spotlight on fees?

A damning report by financial regulator ASIC, released in November, found more than one in five consumers in the previous year had struggled to scrape together the funds to pay for bills in order to make their BNPL payments on time, having missed payments for household bills, credit cards and mortgages, and even cut back on meals in some cases.

Despite these endeavours, 21% of BNPL users surveyed said they’d missed a payment in the last 12 months to November, adding $43 million to the pockets of BNPL providers from missed payment fees during the 2018-19 financial year, an increase of 38% compared to the previous financial year.

Some buy now pay later providers have sought to address this by signing up to a voluntary ‘code of practice’, effective from 1 March, which they drafted in consultation with ASIC. The code sets out the minimum standards participating companies need to meet, including a cap on late fees, credit checks being required on transactions of more than $2,000 and a minimum age of 18 years for customers to be able to use the services.

A CBA spokesperson told Canstar the organisation was already highly regulated due to its operations as a bank, but it may look at applying the voluntary code of practice to CommBank BNPL closer to the launch date of the new service.

If you are one of the many Australians using or thinking of using buy now pay later services, you may want to compare providers and consider if it’s the right payment option for you by taking into account the pros and cons, as well as any fees and charges involved:

This article was reviewed by our Sub Editor Tom Letts before it was published, as part of our fact-checking process.

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