Citi Australia enters buy now, pay later market
Citi Australia will capitalise on surging demand by launching a buy now, pay later service to compete head-on with the likes of PayPal, Apple, Square and the Commonwealth Bank.
The new BNPL service can be used anywhere Mastercard is accepted locally and abroad, online and in-store.
On Wednesday, Citi said the new business will give customers access to as much as $1000 initially to be repaid in four fortnightly instalments.
For purchases of $200 or more customers will have the option to pay a $10 flat fee to break the payments down into eight smaller fortnightly payments.
Further, they can add Spot. to their digital wallet.
Launching in October, consumers can apply online, or via the Citi mobile app if they are an existing Citi customer.
Spot. will be an entirely separate brand and issued by Citi’s affiliated company, Diners. It will leverage Mastercard’s leading payment network.
Citi's head of cards and loans Choong Yu Lum said this is a global first for Citi, and the bank is confident that success in the Australian market could lead to a worldwide rollout of the new payment method.
“Spot. is frictionless for merchants, who can offer the Spot. BNPL product to their customers, with no extra fees for use or technical integration required.
Payment specialist Bradford Kelly noted that Spot. is going after debit card customers.
“Small BNPL’s can’t compete with this. This is a game of scale and Citi is the fifth biggest card issuer in the country and one of the world's largest banks. Game over,” he said
“Most vulnerable now is Zip who will struggle to differentiate themselves and are now fighting a war on five fronts - Apple, Commonwealth Bank, Citi, Paypal, and Square/Afterpay.
Kelly added that no integration is required, and merchants can surcharge if they want which they cannot do on AfterPay or Zip.
“So, ask yourself, if you are a merchant, you can pay 6 percent to Afterpay or Zip, or you can pay a standard merchant fee around 1.5 percent and surcharge if you want for Spot. which is the same product with the same outcome. What would you do?”
Citi research has revealed that while 98 percent of Australian credit cardholders are aware of BNPL services, only 25 percent have used them.
“How Australians use credit is evolving, and there remains an opportunity for new players to step in and listen to consumers who are sending a clear message they want innovative payment solutions to help them manage their finances,” Lum said.
Moreover, RFi research indicates that the typical BNPL user is changing, with consumers aged between 25 and 44 seeing the greatest increase in adoption over the last two years.
The RFi data also shows that while overall use of BNPL is plateauing, use of more than provider is increasing.
“While some may have the perception that BNPL tools are the domain of young Australians purchasing fast fashion – this view is outdated, and this payment method has much greater appeal across demographics and purchasing categories,” Lum added.
“Spot. will stand out in this growing market as a solution for consumers as it solves existing pain points. The service is not limited to specific merchants but is available anywhere Mastercard is accepted.
“While some providers insist that consumers must link an account from a specific financial institution, Spot will ask consumers to link an account of their choice.”