Afterpay Ltd will launch its banking app in October to widen its offerings beyond buy now, pay later (BNPL) services for its 3.5 million-plus Australian users as competition intensifies, the company said on Tuesday.
The move by Afterpay into banking will test the reach of its relationship with users after a year of explosive growth that saw more people choose to pay in instalments for everyday items during the pandemic.
Afterpay hopes those same users will now be willing to deposit their salaries in saving accounts created in partnership with Australia’s No.2 lender, Westpac Banking Corp, earning interests of 1% per year.
The new app, called ‘Money by Afterpay‘, will be tested by its Australian staff from Tuesday, and the company said it has got a financial service licence to provide debit cards and general financial product advice.
Afterpay users will also be able to set savings goals with up to 15 separate accounts, designed to offer greater money management tools.
RBC Capital Markets said the accounts would help Afterpay save on processing fees and improve its margins, apart from offering a “large revenue stream from referral fees across a broad range of banking products.”
After the BNPL sector’s rapid growth over the past year, bigger companies are looking for a piece of the pie.
PayPal Holdings is looking to challenge Afterpay‘s dominance in Australia, while Commonwealth Bank will soon launch its own BNPL service. Apple is also working on its own offering, according to a report.
Shares of Afterpay climbed 1.9%, while the broader market fell more than half a percent.
For now, Afterpay will launch the app only in Australia, where BNPL adoption is higher than elsewhere with around 30% of adults having a BNPL account.
The company’s main global rival, Klarna, has a banking licence in Europe.