News of buy-now-pay-later fintech Afterpay and traditional bank Westpac joining forces to launch a new suite of bank accounts seemed a) kinda surprising, and b) confusing. What would the Westpac and Afterpay deal look like? And is this actually good or bad for young people?
Read on to find out the basics.
What Happened?
In a nutshell: Afterpay will soon be offering simple bank accounts, using Westpac’s technology, security and banking license, in a deal that will benefit both brands.
These will be simple savings accounts, allowing users to make deposits, make transactions, and of course their buy-now-pay-later repayments, all within the Afterpay platform. There will also be free budgeting and cash-flow management tools launched as part of the new finance offering.
Banking licenses are complicated and hard to get (as they should be!) So, rather than jumping through hoops to trying to get their own license, Afterpay will be using Westpac’s banking-as-a-service tool, 10x. All of the regulations and the guarantee on deposits will be covered by Westpac.
The Westpac and Afterpay deal is set to officially launch in June 2021.
Afterpay $APT has partnered with Westpac $WBC on its new digital banking platform. APT will provide cashflow management tools to WBC’s 3.3M customers in Australia in 2Q21 #ausbiz #fintech pic.twitter.com/PPKfmiMrQY
— CommSec (@CommSec) October 19, 2020
Who Does This Benefit?
Afterpay: The real value is in the customer data – Afterpay will be able to see how much and what people are spending on, and tweak their other offerings to suit or share this insight with their retail partners. The company says they will use the data to help support, encourage and reward “responsible spending behaviour”.
Expanding into new areas outside of buy-now-pay-later also seriously strengthens the Afterpay brand.
Westpac: Anyone who signs up for an Afterpay account will essentially become a Westpac customer, as the money will be passing through the bank’s system. Westpac lacks younger customers, so this deal helps them recruit an important consumer segment.
There is also likely to be a revenue-sharing agreement between both brands, but it will only come into play if and when this partnership starts to make a profit.
Consumers: Choice is always good for consumers, but we won’t know how well the Afterpay accounts stack up to neo-bank competitions like Up, 86 400, Xinja, etc until the products launch next year. Based on Afterpay’s existing priorities and the approach of Aussie neobanks so far, we can probably assume the focus will be on: simplicity, great branding, low-to-no fees, and using data to provide a highly personalised experience.
So, Is This Good or Bad?
Very hard to say!
The Good:
- It’s proof traditional banks are really starting to pay attention to younger consumers, and are changing to meet our needs
- More choice is good!
- Having greater oversight over the whole picture of an Afterpay customers finances will help the company deliver financial education and guidance to those who may be at risk
The Bad:
- Afterpay has argued against more regulation for the fintech industry and buy-now-pay-later businesses. Although the deal is 100% legal, it does give them more power without also increasing their legal responsibility to consumers – that still sits with Westpac
The In-Between:
- Youth-focused neobanks tend to put a huge emphasis on the aesthetic and simplicity of the account and product – this is does not automatically mean it’s a better option. You still need to do your research before signing up!
- You’ll have to decide how you feel about providing more financial data to Afterpay. They could easily use this info for good, or use it to further fuel consumer culture…
Further Reading
‘Devil in the detail’: What the Afterpay-Westpac deal means for consumers from The New Daily
Afterpay and Westpac chase banking’s brave new world from Australian Financial Review (paywalled)
Afterpay joins forces with Westpac to offer banking-as-a-service to Australian customers from SmartCompany
‘Buy now, pay later’ stars like Afterpay, Zip don’t need regulation, Senate inquiry into fintech says from ABC Online
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