Ten months ago, Afterpay announced a new partnership with Westpac was on the horizon, which would enable its three million-plus customers to apply for Afterpay-branded savings and transaction accounts directly through the buy now pay later (BNPL) provider.
This Tuesday, Afterpay revealed more details around the soft launch of ‘Money by Afterpay’, which is a mobile finance app targeted primarily at Gen Zers and Millennials. Customers will be able to view and manage their Westpac-backed savings and transaction accounts via this app, once it launches publicly in October.
What is Money by Afterpay?
Money is an upcoming mobile app by Afterpay that will display a customer’s buy now pay later balance, upcoming orders and instalments due, alongside their new daily spending and savings account details. These transaction and savings accounts are set to launch to the public alongside the app from October. Afterpay staff have been given first access to the app from 20 July.
The savings account
The savings account will have an interest rate of 1% on balances up to $1 million, with no strings attached to earn the full rate. As with most savings accounts, Afterpay notes that the 1% rate is subject to change, however. Customers will be able to open up to 15 different savings accounts. The accounts would all be held on Westpac’s balance sheet, as it has a deposit licence and Afterpay doesn’t.
Interestingly, Canstar’s database shows the most an adult banking directly with Westpac could generally earn on a savings account would be just 0.40% at the time of writing. 18-29 year-olds who meet certain eligibility criteria could earn up to 3% interest on their savings in a Westpac Life account.
Looking at Canstar’s database, about 38% of savings accounts are similar to Afterpay’s, in that they do not have conditions that need to be met in order to earn an ongoing bonus rate or promotional rate.
The top savings account rate with no conditions to earn ongoing interest on Canstar’s database is currently Macquarie Bank’s Savings Account at 0.95%. It’s followed by Volt at 0.90%, Qudos Bank at 0.60%, Arab Bank Australia at 0.50% and Great Southern Bank, MOVE Bank and Teachers Mutual Bank at 0.40%.
The highest savings account rate without an age limit overall on Canstar’s database is available from Rabobank Australia and ING, where customers could earn up to 1.35%. But those rates come with other strings attached, in that Rabobank’s High Interest Savings Account rate is only available for the first four months before falling to 0.25%, and ING’s Savings Maximiser requires customers to grow their balance, deposit at least $1,000 from an external bank account and make five card purchases each month, otherwise the rate falls to 0.05%.
The transaction account
Afterpay customers will be able to open one transaction account in the Money app. The account will come with a physical debit card, digital wallet offerings and the ability to make real-time payments.
According to Afterpay, customers will not be charged any fees, and features will be introduced to help customers make “more informed” spending and saving decisions.
Just as Westpac is the issuer of the savings account, the major bank will also be the licensed card issuer for the transaction account.
Is it safe to bank with Afterpay?
Money that customers store in the savings and transaction accounts will be secured and protected by a Federal Government guarantee of up to $250,000, thanks to Westpac’s licence as an authorised deposit-taking institution (ADI), while the customer side will effectively be managed by Afterpay.
Afterpay’s venture into banking is made possible by Westpac’s 10X bank-as-a-service platform, launched in November 2019, that essentially opens a back door for fintechs to provide full banking services, but with the added security of a major bank brand, as well as its banking licence and systems.
While Westpac will be the regulated deposit account and card issuer, Afterpay obtained an Australian Financial Services Licence (AFSL) earlier this year from the Australian Securities and Investments Commission (ASIC) to enable it to provide general financial product advice and distribute basic deposit products and debit cards.
According to the Australian Financial Review, Afterpay hopes the launch of the transaction accounts will drive more spending on its buy now pay later offering, with plans to add investment and superannuation options down the track.
As we’ve reported previously, access to customers’ transaction data could give Afterpay further insights into their customers, such as of whether a person is creditworthy, and whether there are any other financial products they can sell to tehem in the future.