Can Commbank BNPL rival Afterpay?
CommBank has unveiled its own buy now, pay later service called Commbank BNPL but there are “fatal flaws” in the business, according to Datt Capital’s Emanuel Datt.
This was the second foray to the buy now, pay later service for the bank after it previously invested millions in Afterpay rival Klarna, where it is now a 5% shareholder. However, the European firm struggled to break into Australia and challenge Afterpay.
Shares in Afterpay rose 769% over one year to 18 March 2021 compared to returns of 41% by the ASX 200, while Commonwealth Bank shares had risen 38% over the same period. Klarna was not yet publicly listed.
While the Commbank BNPL service was an interesting move by the bank, there were “fatal flaws” in the business, the largest of which was the focus on merchants rather than customers who were the key driver of Afterpay’s dominance.
Emanuel Datt, chief investment officer at Datt Capital, said: “A cursory glance at the product design for Commbank BNPL reveals several fatal flaws that will almost certainly lead to the same outcome as Klarna locally.
“Commbank BNPL fails in the sense that it focuses too heavily on the supply (merchant) side of the equation without any compelling proposition for the customer themselves.
“CBA has stated that it would conduct credit checks and would block customers if they were in arrears with other providers. This is in addition to higher proposed late fees than currently charged by Afterpay.”
He said this was a rare instance where Datt Capital would continue to back the market leader rather than a new challenger.
However, Stephen Hiscock, managing director at SG Hiscock, said although Afterpay was the market leader, it would likely be overtaken in the future as there were multiple new services being launched.
As well as the Commbank service, payment giant PayPal unveiled a BNPL services last year called Pay in 4 which was expected to launch in Australia later this year, around the same time as the Commbank one.
“Afterpay is good at holding competition back but how long can they do that for? Commercial banks are coming for Afterpay as are Paypal which has a service it is rolling out,” he said.
AUTHOR
Laura Dew
Recommended for you
Clime Investment Management has faced shareholder backlash around “unsatisfactory” financial results and is enacting cost reductions to return the business to profitability by Q1 2025.
Amid a growing appetite for alternatives, investment executives have shared questions advisers should consider when selecting a private markets product compared to their listed counterparts.
Chief executive Maria Lykouras is set to exit JBWere as the bank confirms it is “evolving” its operations for high-net-worth clients.
Bennelong Funds Management chief executive John Burke has told Money Management that the firm is seeking to invest in boutiques in two specific asset classes as it identifies gaps in its product range.
