Citi Australia has confirmed that it will be launching a new proposition that enables customers to pay for goods up to the value of $1,000, which can then be repaid in four instalments over six weeks.
The digital buy now, pay later (BNPL) offering will be accepted wherever Mastercard is accepted (either locally or overseas) and can be linked to any deposit account.
Unlike credit cards, the product will not charge customers any interest.
The product, which will be launched under a yet-to-be-announced brand (given Citi’s impending sale of its consumer banking arm in Australia), is expected to be rolled out in the third quarter of this year.
Consumers will also be able to access longer-term repayments or larger lines of finance “for a small fee”.
lan Machet, Citi Australia Consumer Banking CEO, commented: “We are excited to announce the upcoming launch of a buy now, pay later product, which will be live later this year. It will be launched under a new brand name and be available anywhere you can pay with Mastercard – locally or abroad, online or in store.”
Further details of the upcoming product are expected in the coming weeks.
The proposition builds on Citigroup’s recent partnership with PayPal, which will next month see the group issue the online payment provider’s first credit card in Australia.
Banks turn to BNPL offerings
Citi has become the latest bank to announce that it will roll out a Mastercard-linked BNPL offering, following in the footsteps of a similar teaser from the Commonwealth Bank of Australia (CBA).
As announced in March, CBA is ramping up to make available its BNPL offering to customers from “mid-2021”.
CBA’s BNPL product – available for purchases under $1,000 – will also be accepted anywhere Mastercard is accepted and will be available to customers via a card in their digital wallet (i.e. on their mobile phone, smartwatch, tablet).
With the product, purchases over $100 will automatically be split into four equal, fortnightly instalments.
The product will link to the customer’s CBA bank account.
While there are no ongoing fees or foreign exchange fees, there will be a $10 late fee for every missed instalment repayment (for example, if there is not enough money in the customer's account to cover the payment).
The growing interest in BNPL payment offerings come amid a growing uptake and interest in BNPL usage in Australia.
According to ASIC’s recent report 672, BNPL arrangements have increased in popularity in the last few years, rising by 90 per cent between the 2017-18 and 2018-19 financial years alone, when the number of BNPL transactions hit 32 million.
As at 30 June 2019, there were around 56,000 merchant agreements in place across the six buy now, pay later providers covered in the review, ASIC found.
[Related: Citi to sell Australian consumer business]
Annie Kane is the editor of The Adviser and Mortgage Business.
As well as writing about the Australian broking industry, the mortgage market, financial regulation, fintechs and the wider lending landscape – Annie is also the host of the Elite Broker and In Focus podcasts and The Adviser Live webcasts.