Commonwealth Bank of Australia (ASX: CBA) is launching a BNPL service. Is this bad news for Afterpay Ltd (ASX:APT) and Zip Co Ltd (ASX:Z1P)?
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According to the release, the banking giant’s BNPL offering will begin rolling out to eligible CBA customers from mid-2021 and be able to be used anywhere debit and credit card payments are accepted.
The service closely resembles the Afterpay product for shoppers. It allows them to make fortnightly instalments for transactions and comes with a limit of $1,000.
However, the service differs for merchants, as it carries no additional merchant fees above the standard merchant service fees. Whereas Afterpay and its peers also take a cut of the transaction as well.
CBA’s Group Executive, Retail Banking Services, Angus Sullivan, commented: “When making a payment, customers will have additional flexibility to use it for their everyday spending for smaller purchases as well as split over four instalments to help smooth payments for bigger purchases.”
“Additionally we know transaction costs are important considerations for businesses. Unlike some other BNPL providers which may charge a high fee, there are no additional fees to businesses when customers choose to pay with CommBank’s BNPL,” Mr Sullivan said.
Is this a threat to Afterpay and Zip?
The addition of another major player in the industry appears to have some investors concerned. Especially one with such deep pockets and a large customer base.
However, analysts at Goldman Sachs aren’t fazed by the news. It explained:
“While the headline would suggest competition is intensifying we do not believe it is likely to materially impede on APT’s market position. APT’s 3.4mn customers are transacting on average 18x per annum (1H21 annualised trends). And while merchants may benefit from a lower transaction cost, APT has likely aggregated a user base that is possibly different to the user base that CBA may appeal to. We also note that recent launches of Klarna and NAB no-interest credit cards have yet to have any noticeable impact on APT’s growth relative to our forecasts.”
In light of this, the broker has made no changes to its estimates or rating. It continues with its neutral rating and $127.60 price target on Afterpay’s shares.
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James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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