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CBA StepPay launches today – how it stacks up in a crowded BNPL market
Since publishing, the Federal Government of Australia has announced its decision to regulate the BNPL industry under the National Consumer Credit Protection Act. As a result, BNPL providers in Australia will soon be required to comply with Responsible Lending Obligations and hold Australian Credit Licences. The new regulations may also impact the way BNPL services operate by introducing credit checks for individuals signing up for these services in the future. Additionally, to promote transparency in credit services and safeguard consumer interests, the government plans to prohibit BNPL providers from automatically raising credit limits for customers who have not requested it.
Australia’s largest bank, CBA, has today launched its new buy now, pay later service, ‘StepPay’.
Existing CBA customers can apply for the new payment option, and, when approved, use it anywhere MasterCard is accepted, with no extra cost to merchants.
StepPay purchases between $100 and $1,000 are divided into four equal, fortnightly repayments with the first one coming out at the time of purchase.
It has been a very busy time for the buy now, pay later (BNPL) sector with PayPal launching its Pay in 4 platform on 14 July, while Citi’s new platform ‘Spot’ opened for pre-registrations on 4 August, for a launch in October.
How does CBA StepPay compare to Afterpay and PayPal Pay in 4
The three BNPL platforms provide a similar offering to customers, with no interest charged, no account fees and fortnightly payments plans that typically run over six weeks.
However, CBA will do a more comprehensive credit check on customers signing up to StepPay, requiring them to hold a CBA transaction account which receives the person’s regular income. In addition to this, they will do an internal credit assessment and an external credit check on every customer at application.
StepPay customers will not be charged a currency conversion fee when shopping overseas, whereas existing CBA transaction account holders will be charged 3 per cent.
| CBA StepPay | PayPal 'Pay in 4’ | Afterpay | |
| Interest charged | None | None | None |
| Account fees | None | None | None |
| Max credit limit | Initially $1,000 | Not disclosed | $2,000 |
| Max purchase price (individual item) | $1,000 | $30 - $1,500 | Up to $1,500 |
| Credit check | Yes | Only select customers | No |
| Where you can use it | Anywhere MasterCard is accepted. | Anywhere PayPal is accepted. | Affiliated retailers |
| Late fees | $10 per missed payment, capped at $120 per year. | None | $10 per missed payment, extra $7 if not paid in 7 days, capped at 25% of price or $68, whichever is lower. |
| Outstanding accounts | Account frozen until sufficient funds in linked account.
Defaults reported to credit agencies. | Pay in 4 account frozen. Delinquent customers could see normal PayPal account limited. Defaults reported to credit agencies. | Afterpay account frozen. Defaults not reported to credit agencies. |
RateCity.com.au research director, Sally Tindall, said: “Australia’s biggest bank is doubling down on the buy now, pay later sector, with a stake in Klarna and now the launch of its in-house platform.”
“While the platform is likely to be popular among existing customers, many non-CBA customers will be deterred by the requirement to move their everyday banking over to CBA,” she said.
“Where market leader, Afterpay, could start losing ground is among merchants who could opt not to provide platforms that charge higher fees.”
CBA has developed a buy now, pay later platform with one of the most comprehensive credit assessments to date. Before approving a customer, the bank checks their income (or regular deposits), spending habits and what other debts they might have via a credit check.
“CBA has set the benchmark for banks entering this sector. It will be interesting to see if Afterpay strengthens its credit assessment process when they start white labelling Westpac products from October of this year,” she said.
“Importantly, CBA will also report defaults, something PayPal has committed to, but not Afterpay.
“One thing the bank can’t do is check whether customers have other BNPL accounts that aren’t linked to CBA and may not show up in a credit check.
“Last year’s ASIC report into the buy now, pay later sector found people getting into trouble were more likely to have multiple accounts.
“While a single buy now, pay later account is limited in the harm it can do, a person who is signed up to four or five different platforms can easily end up in a world of pain if they’re not careful,” she said.
How to avoid getting into trouble using BNPL platforms:
- Read the terms and conditions and understand which fees you could get hit with.
- Set yourself strict spending limits.
- Limit yourself to one platform, and one purchase at a time.
- Don’t impulse buy. Sit on any major purchases for at least 24 hours.
- If you get into trouble, pull the pin and call for help. Each platform should have a hardship policy to help you get out of trouble.
Buy now pay later boom – 20+ platforms now available in Australia
RateCity.com.au analysis of the buy now pay later industry in Australia shows there over 20 different BNPL services operating.
Key BNPL platforms offering smaller loans– contact us for a full list
| BNPL provider | Where you can use it | Payment schedule | Max credit limit | Account fees | Late fees | Credit checks |
| Afterpay | Affiliated retailers | 4 instalments over 6 wks | $2,000 | None | $10 per missed payment, extra $7 if not paid in 7 days, capped at 25% of the price or $68, whichever is lower. | No |
| Bundll | Anywhere Mastercard is used | Repay within 2 wks. Extend up to 12 wks for fee | Between $1K- $4K | None for basic bundle. 2-wk extension is $2.50, 12 wk plan is 5%. | $10 late payment fee then account is suspended. | No check for standard bundle. Yes for superbundll. |
| CBA StepPay | Anywhere Mastercard is used | 4 instalments over 6 wks | $1,000 | No interest or monthly fees. | $10 per missed payment, capped at $120 per year. | Yes and customers’ bank accounts are checked. |
| Fupay | Almost everywhere | 8 weekly repayments | $200 - $500 | 5% of price. | Not stated. | No but customers’ bank accounts are checked. |
| humm (Little Things) | Affiliated retailers and BPay billers | 5 – 10 fortnightly payments | $2,000 | $0 or $8 /mth for longer payments. | $6 late payment fee. | No |
| Klarna | Affiliated retailers | 4 fortnightly payments | $1,000 | $0 for standard plans. $7 if you extend. | $3-$15 per late payment depending on size. Max $45 per purchase. | Yes |
| LatitudePay | Affiliated retailers | 10 weekly payments | $1,000 | None | $10 | Yes |
| Laybuy | Affiliated retailers | 6 weekly repayments | Undisclosed | None | $10/late payment. Extra $10 if not paid in 7 days. | Yes |
| PayItLater | Affiliated retailers | 4 weekly instalments | $1,000 | None | $10/late payment. Extra $10 if not paid in 7 days. | Does own check. |
| PayPal Pay in 4 | Anywhere PayPal is accepted | 4 instalments over 6 weeks | $30 - $1,500 | None | None. | May do credit check. |
| Zip Pay | Anywhere | Min $40/mth | $1K - $1.5K | $6/mth if you have money owing. | $5 after 21 days of not paying the minimum. | Yes |
Disclaimer
This article is over two years old, last updated on August 18, 2021. While RateCity makes best efforts to update every important article regularly, the information in this piece may not be as relevant as it once was. Alternatively, please consider checking recent bank accounts articles.
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