CBA takes aim at Afterpay merchants with free cash

George Lekakis

Commonwealth Bank is about to test to the viability of business models underpinning buy now pay later monoliners such as Afterpay after announcing that it will pay merchants for using its recently launched BNPL scheme.

The country’s largest bank revealed on its website on Monday that it will pay merchants accepting transactions through its StepPay platform a rebate of 4 per cent on the value of purchases until the end of December.

The cash incentive, which equates to A$20 on a $500 transaction and $40 on a $1000 purchase, could result in merchants offering discounts to customers if they use the service.

CBA has set a ceiling of $5000 it is willing to pay each merchant transacting through StepPay.

The offer is available only to merchants who have a merchant terminal and transaction account issued by CBA.

Established BNPL platforms such as Afterpay and Zip charge merchants up to 4 per cent on each transaction accepted through their schemes and specifically preclude them from recouping the cost from customers.

CBA’s promotion to merchants comes as the Reserve Bank last month signalled its intention to put BNPL schemes on an equal footing with credit and debit card schemes by prohibiting no-surcharge rules.

Payments experts believe CBA’s loss-leading move will test the loyalty of merchants to incumbents in the BNPL market and create an incentive for the bank to boost its market-leading position in merchant acquiring.

“Rebating merchants for Step pay transactions is designed to apply pressure to Afterpay and Zip through CBA’s extensive merchant network by hitting them at their weakest point – high fees and an inability to surcharge,” Brad Kelly, managing director of Sydney-based consultancy, Payment Services.

“CBA will also use this strategy to poach Business Bank customers from other Banks by using their new “all you can eat” merchant plan which requires a CBA account to get the 4 per cent rebate on StepPay.

“CBA is the grinch that stole Christmas from AfterPay and Zip by not only removing fees for BNPL, but rebating 4 per cent and allowing surcharging giving retailers an almost 10 per cent windfall.”

CBA’s aggressive marketing pitch for StepPay coincided with a comparatively low-key confirmation from Citibank subsidiary – Diners Club – that its new BNPL scheme trading as Spot had gone live on Monday.

Melissa Hall, Citi’s head of new business development, announced the launch of the Spot platform in a social media post.

Spot is similar to StepPay in that it can be used anywhere that Mastercard is accepted. 

Several big chain retailers including JB Hi-Fi have already begun promoting Spot as a payment method in their stores and online.