RMIT expert available for comment on CBA joining the buy now pay later (BNPL) space

Dr Angel Zhong (0433 810 413 or angel.zhong@rmit.edu.au)

Topics: BNPL, CBA, AfterPay, Zip ASX

“The Commonwealth Bank (CBA) announced that it will launch its buy now pay later product.

“BNPL stocks have not been performing well in the recent week due to tech stock price correction and rising bond yields.

“Share price is a function of future cash flows. With CBA entering and potentially grabbing some market share, BNPL stock price will suffer further.

“This could pose a major challenge to the existing players in the BNPL space.

“CBA is likely to offer lower merchant fees and given their presence in the traditional banking sector, it is more likely to touch on a group of customers that have never considered BNPL.

“CBA’s entrance also implies that the BNPL sector will grow bigger and raise the possibility of regulation.

“At the moment, BNPL is not regulated like other consumer lending institutions given that they do not charge consumers for credit. They charge merchants instead.

“In 2020, the RBA said that BNPL will not be regulated as it is a small segment.

“This happened when credit cards entered the market, but were regulated once they became popular.

“With the potential growth in BNPL services, regulations should be put in place to ensure consumer protection and financial wellbeing. 

"Responsible lending means lending to those who can afford it.

“BNPL companies claim that they charge fees for late payments and put a cap on late payments.

“Internationally, there are regulations for BNPL services in some countries. The UK government recently announced that it will be regulating the sector.

“Recently, the BNPL companies have devised a set of self-regulation codes, known as the AFIA Buy Now Pay Later Code of Practice.

“ASIC suggests that it will require an effective code of self-regulation and lists requirements for an effective code in a report in December 2020.”

Dr Angel Zhong is a Senior Lecturer in Finance in the School of Economics, Finance and Marketing at RMIT University. Her research focuses on investment and investor behaviour in share markets.

For interviews, contact Dr Angel Zhong on the details above. For other media enquiries, contact RMIT Communications: 0439 704 077 or news@rmit.edu.au