How BNPL is reinventing credit cards

  • By Christine St Anne

The recent decision by two big banks to launch zero interest credit cards – virtually a day after each other – has signalled a rethink by banks on their cards businesses driven by the rise and rise of buy now, pay later.  

National Australia Bank was first off launching its Straight Up Card. Twenty four hours, Australia’s largest lender launched its Neo card although it wont’ be available to customers until late this year.

In launching the Straight Up Card, NAB group executive, personal banking, Rachel Slade acknowledged changing consumer needs.

“Credit cards have not really evolved in recent years. But our customers’ needs and expectations are changing and we want to change with them,” she said.

“In the NAB StraightUp Card, we’ve created something completely different to every other credit card available today, with a simpler approach that makes it easy for customers to take control of their finances.”

The offerings are also targeted to younger demographics, the key cohort embracing installment payments.

With BNPL juggernaut AfterPay securing 20,500 customers a day on its platform, it’s no surprise banks are rethinking their card propositions.

For RFi Group managing director, consulting Alex Boorman, the launch of these products seem to be positioned to not only target younger groups but also taken them along the credit journey with the bank.

“I see these products as being entry level cards, that is cards that people start their credit card experience with,” Boorman said.

Here, the assumption would be that people would gravitate to conventional cards once they find the available credit limit is no longer sufficient.

“It is interesting because until now entry level products have not really been a focus for the banks, because they are poor revenue generators versus other types of cards,” Boorman said.


Compare the pair

“BNPL has likely increased focus on them because people have been starting their credit journey with BNPL rather than with a card.”

CBA’s credit card also offers access to discounts and cash back offers with a range of retailers through CommBank Rewards.

For example a customer may receive a $15 cash back offer when they spend at one of the 80 plus retailers.

According to RFi Group, rewards remain a viable way of capturing the cardholder’s wallet, more than for non-rewards offerings.

CBA’s card will have credit limits of $1,000, $2,000 and $3,000 with no interest and no late or currency conversion fees.

RateCity has undertaken some analysis to compare and contrast the offerings.

While CBA’s card is eerily similar to the NAB card, aside from the small variation in monthly fees, there are two key differences, according to RateCity research director Sally Tindall.

“The main difference between the two cards is NAB is asking customers to pay back more of their debt each month, which will see them clear it faster,” she said.

The second difference is the loyalty offering as highlighted earlier.

With BNPL underpinning this new rollout of these new credit cards, RateCity also provided a comparison of how NAB and CBA’s offerings compare with other BNPL providers.

The most notable difference between the banks and BNPL providers is around late fees.

Tindall too believes that banks have been forced to come up with a credit card that can compete with BNPL.

These new cards signal it’s game on between the big banks and buy now, pay later, she said adding that “at this rate, Westpac and ANZ will have interest free cards on offer before the week’s out”.