NAB has announced it will launch a buy now, pay later option in July, with pre-registrations opening today.
NAB is the second big bank to directly offer customers a buy now, pay later (BNPL) option, following the launch of CBA’s StepPay in August last year. There are now 25 BNPL providers on the RateCity database, including other heavy hitters to join the sector in the last 12 months such as PayPal and Suncorp.
NAB Now Pay Later will offer customers the option to pay in four instalments over a total of six weeks, with no late fees, account fees or interest charges. It will be available anywhere Visa is accepted, with a total borrowing limit of $1,000.
To apply, customers will need to open a NAB Classic account, which has no account keeping fees.
Unlike market leader Afterpay, NAB will carry out a credit check on every applicant before approving them.
How NAB Now Pay Later stacks up:
|NAB Now Pay Later||Afterpay||CBA StepPay||PayPal Pay in 4|
|Where you can use it||Anywhere Visa is used||Affiliated retailers||Anywhere Mastercard is used||Anywhere PayPal is accepted|
|Payment schedule||4 instalments over 6 wks||4 instalments over 6 wks||4 instalments over 6 wks||4 instalments over 6 wks|
|Max credit limit||$1,000||Up to $3,000 for existing customers||$1,000||$1,500|
|Account fees||None||None||No interest or monthly fees. Also waiving currency conversion fees.||None|
|Late fees||None||$10 per missed payment + $7 if not paid in 7 days (capped at 25% of the price or $68, whichever is lower)||$10 per missed payment, capped at $120/yr||None|
|Credit checks||Yes||No||Yes||Only in some cases|
What the big four banks are offering in the BNPL space:
Both CBA and NAB have made major moves into the ever-expanding buy now, pay later sector.
In addition to its own BNPL service, NAB offers a ‘no interest’ credit card. It is also in the process of acquiring Citi, including its BNPL service ‘Spot’.
CBA has a partnership with BNPL provider Klarna, its own BNPL service, StepPay, and a no interest credit card.
Westpac currently has a no interest credit card but no BNPL offering. (Westpac also provides Afterpay with white-labelled banking products).
RateCity.com.au research director, Sally Tindall, said: “NAB knows the buy now, pay later sector is here to stay and is doubling down on its options.”
“Not only is the bank launching its own buy now, pay later service in July, it’s about to acquire Citi’s platform in a matter of weeks,” she said.
“The big banks were slow to react to the emergence of the buy now, pay later sector. Now CBA and NAB are going all in, with multiple payment options for customers. ANZ is the only big bank keeping its powder completely dry.
“NAB’s new buy now, pay later option will be available anywhere Visa is accepted for the same cost as a credit card transaction, similar to CBA’s offering via the Mastercard network.
“This is likely to put pressure on existing buy now, pay later providers that charge some retailers more for these transactions.
“While NAB is doing the right thing by carrying out a credit check on every single applicant, the bank still might not have oversight of a person’s total debts if they’ve signed up to a buy now, pay later provider that skips credit checks,” she said.
CBA and NAB banks have now joined the sector but are not signing up to the industry’s Code of Practice, opting for their own more stringent checks instead.
“You have to question just how many teeth the self-prescribed Buy Now, Pay Later Code of Practice actually has when two of Australia’s biggest banks are refusing to sign up,” she said.
“The buy now, pay later sector is growing at breakneck speed, with little regulation to protect consumers, despite the fact many are finding themselves in hot water as a result of overspending on these platforms.
“Enough is enough. It’s time for the government to step up to the plate and properly regulate this evolving sector,” she said.
BNPL – what regulation is there?
Currently the BNPL industry is self-regulated with an industry “Code of Practice”. However, big players such as CBA and NAB have not signed up to the code.
The code includes caps on late fees, support for vulnerable customers and freezing of accounts when repayments are missed. The code also requires its BNPL members to write their terms and conditions in plain language, prominently display information about fees and send customers reminders when payments are due.
The code, however, does little to limit people from signing up to multiple debts, a key issue identified by ASIC. It also allows platforms offering less than $2,000 worth of debt ($3,000 for existing customers) to, in most cases, skip credit checks.
What the code is missing:
- Credit checks for all applicants.
- Proper assessment of a person’s ability to repay the credit limit, and all other debts.
- Reporting to credit bureaus.
- A requirement for all BNPL providers to adhere to the code.
Tips 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.