Commonwealth Bank of Australia (CBA) will soon be entering the buy now, pay later (BNLP) market with its own offering that will roll out to eligible customers from mid-2021.
The yellow bank said the BNPL offering would be linked to its customers' bank account, can be used anywhere debit and credit payments are accepted for transactions, and there will be no ongoing fees. There will also be no additional cost to businesses, other than standard merchant fees.
BNPL allows individuals to purchase goods without immediate payment. Instead, users can pay for the purchase of a good later or in instalments.
The offering is in line with shifting customer preferences to access low-cost short-term credit, CBA retail banking services group executive Angus Sullivan boasted.
"When making a payment, customers will have additional flexibility to use it for their everyday spending for smaller purchases as well as split over four instalments to help smooth payments for bigger purchases," he said.
"Additionally, we know transaction costs are important considerations for businesses. Unlike some other BNPL providers which may charge a high fee, there are no additional fees to businesses customers choose to pay with CommBank's BNPL."
The bank added it has developed a "robust criteria" before customers are approved for BNPL, including being able to show evidence of a regular salary deposited into a CBA transaction account. Customers will also not be able to use BNPL for cash advances or gambling, the bank said.
"As the leading digital bank in Australia, we believe we are best placed to offer our customers a prudent and responsible BNPL option based on the trends and insights sourced from real-time transaction data over many years," Sullivan said.
Developed by the Australian Finance Industry Association (AFIA), the code [PDF] is touted as being a "proactive approach to increasing consumer protections" that goes "beyond current regulatory obligations for BNPL products or services".
Shadow Assistant Treasurer Stephen Jones said the code was the first step towards an appropriate regulatory regime for the emerging sector.
"This is a genuine attempt by the industry to set sensible and fair rules around conduct in an emerging sector of the financial services sector," he said. "The financial services industry needs to show it has learned the lessons of the Banking Royal Commission and ensure that these code provisions are rigorously enforced."
Existing customers will also be privy to the code's directions and ongoing review of a product or service's suitability when undertaken.
ASIC and the Reserve Bank of Australia have also been looking into the BNPL space, with RBA financial system assistant governor Michele Bullock saying previously that the concern with BNPL wasn't the consumer side, but rather, the payments system.
"The issue we're looking at is really based around no-surcharge rules, which is an issue to do with competition and level playing fields. So that's the issue we're focused on," she said.