Afterpay’s millions of customers will be able to sign up for Westpac-powered savings and transactions accounts under a partnership between the two traditional rivals.
The agreement will allow Afterpay, considered the largest buy now, pay later provider with a market value of $27.7 billion, the ability to offer new products by using Westpac’s deposit taking licence. Meanwhile, Westpac gains access to Afterpay’s 3.3 million customers -- many of which belong to a younger demographic.
“The introduction of savings accounts and budgeting tools offers new customer benefits that continue to build on our core principle of encouraging responsible spending and enabling financial wellness,” Anthony Eisen said, chief executive of Afterpay.
“In deepening our relationship with our customers we will gather greater insights into how they prefer to manage their finances and better understand their savings goals. This will allow us to assist them to budget more effectively and avoid debt traps.”
The deal will also make Afterpay the first partner on Westpac’s banking platform, powered by cloud computing from 10x Future Technologies.
“Fintech innovation is changing banking in important ways and our new digital banking platform is part of our long-term strategy to support this trend and better respond to changing customer needs,” Peter King said, chief executive of Westpac.
“The platform allows us to combine our banking experience with the innovation of our partners to support new customer experiences.”
Afterpay will begin offering its branded savings accounts from the second quarter of 2021.
What is Afterpay?
Afterpay is a digital only service that makes it possible for people to buy an item and pay it off over four, fortnightly instalments.
If repayments are made on time, there’s no charge. But miss a repayment and there’s a $10 late fee, followed by a further $7 fee if it’s still not paid after seven days.
The payment option has proven popular with millennials who have widely embraced the platform.
A RateCity survey found Afterpay led to 16 per cent of people overspending, 14 per cent paying a late fee and 9 per cent going into overdraft on their bank account.
What would an Afterpay savings account look like?
News of the partnership came with little detail on what would fundamentally make an Afterpay savings account different to the options already available to customers, if anything, but this is not uncommon for products that are to be rolled out in several months.
The accounts could be used for typical things, such as paying bills, withdrawing cash and budgeting. The same “simplicity and transparency” that made the application popular would be baked in, Afterpay said.
The savings and transaction accounts could be linked to existing Afterpay accounts to help people budget their spending and reach financial goals. Afterpay said linking two accounts would help them understand “how customers prefer to manage their finances, what their savings goals are, and how responsible spending behaviour can be further encouraged and rewarded”.
More than 60 banks slash savings interest rates
News of an Afterpay branded savings account comes at a time when banks are slashing the interest that savings accounts can generate.
In the last two months, 67 banks cut interest rates on savings accounts by an average of 0.17 per cent, a RateCity analysis found.
The drop in savings rates generally correlates to the drop in mortgage interest rates, as both use the Reserve Bank’s cash rate as a guidepost.
The cash rate is currently at 0.25 per cent, the lowest it’s been in 30 years since records have been kept, and it’s possible it could be cut further at an upcoming board meeting on 3 November.