Afterpay to offer savings accounts via Westpac: Is it becoming a neobank?
Afterpay will offer a savings account and money-management products to its customers in 2021, through a partnership with Westpac.
Expanding on its hugely popular buy now pay later (BNPL) offering, Afterpay will be offering money-management products to its 3.3 million customers in 2021. The fintech will offer a savings account and other cashflow tools to customers through a new partnership with Westpac.
To do this, Afterpay will use Westpac's banking licence instead of applying for its own. This means that when customers deposit money into their Afterpay savings or transaction account, the money will be held by Westpac. As Westpac has its full Authorised Deposit-Taking Institution (ADI) licence, a customer's deposit up to $250,000 will be covered under the government guarantee scheme.
What will the Afterpay deposit accounts look like?
It's not yet clear exactly what accounts Afterpay will offer to customers, or what the fees and interest rates on those accounts will be. The Afterpay ASX announcement said, "Afterpay customers will be able to use their new savings account to conduct the majority of their money management activities, including paying bills, withdrawing cash and budgeting."
While Afterpay has announced it will be offering its savings product through Westpac, it hasn't released any details on the accounts and interest rates so far.
As a comparison, Westpac currently offers a market-leading interest rate of 3.00% p.a. on its Westpac Life savings account for customers aged 18-29. As this rate is only available on balances up to $30,000 when the account conditions are met, this product is very much aimed at young Australians in the early stages of their savings journeys.
Is Afterpay becoming a neobank?
By moving into money-management, cashflow and budgeting products, it certainly appears that Afterpay is tracking to become a neobank. Speaking of the soon-to-be-released savings product, Afterpay CEO and co-founder Anthony Eisen said this new development is "clearly just the beginning as we explore this opportunity globally".
The ASX announcement also said, "Further services and tools will be introduced over time to drive even more benefits to customers."
Afterpay isn't the only buy now pay later brand to heading towards offering more everyday banking products to customers. Also today Zip announced its partnership with Visa, allowing the company to offer its buy now pay later payment solution in the form of a digital card anywhere Visa is accepted.
Currently, it is a common strategy for neobanks to leverage the banking licence of an existing bank when first offering deposit products to the market. For example, Up Bank offers its savings and transaction account products via its partnership with Bendigo and Adelaide Bank. However, the Up products are different to those offered by Bendigo and Adelaide Bank; it's simply the banking licence that Up Bank is using for the accounts.
Other existing neobanks 86 400, Xinja and Volt went a different way and each pursued their own full banking licence.
If you're not happy with your current savings account, compare your options and consider making the switch.