Buy now pay later (BNPL) juggernaut Afterpay (ASX: APT) has secured a deal with Westpac (ASX: WBC) to facilitate the introduction of savings accounts and cash flow tools for its 3.3 million Australian customers.
The products will be managed by Westpac’s newly-launched banking-as-a-service (BaaS) platform which enables businesses without a banking licence to digitally deliver services from a licenced bank via an application programming interface.
The standalone platform is powered by UK-based cloud-native banking technology provider 10x Future Technologies, in which Westpac is believed to have an undisclosed stake.
Afterpay is Westpac’s first partner on the BaaS platform and will use savings and transaction accounts and other cashflow management tools to offer customer-centric alternatives to traditional banking products.
The BNPL provider’s Australian customers will be able to use the accounts to conduct the majority of their money management activities including bill paying, cash withdrawals and budgeting.
Services can also be linked to existing Afterpay accounts to produce insights into how customers prefer to manage their finances, what their savings goals look like, and how “responsible spending behaviour” can be rewarded.
The insights will be used by Afterpay to deliver a more tailored user experience and more mutually-beneficial consumer and retailer connections via its platform.
Afterpay chief executive officer Anthony Eisen said the new tools will build on the company’s core principle of encouraging responsible spending and enabling financial wellness.
“We believe Australians deserve greater support and insight to help manage their money. Together with the power of our retail platform, the latest banking technology from 10x and the support of Westpac, we will begin by offering cashflow management in a simple way,” he said.
“We want to gather greater insights into how [our customers] prefer to manage their finances and better understand their savings goals. This will allow us to assist them to budget more effectively and avoid debt traps.”
The Afterpay deal is not Westpac’s first foray into the BNPL space.
In 2017, the nation’s oldest bank invested $40 million in BNPL rival Zip Co (ASX: Z1P) for a 10.7% equity in the company.
Westpac first unveiled plans to build a greenfield platform on 10x’s next-generation core banking stack in November, to enable third parties including fintech partners to distribute Westpac banking products to their customers.
“The 10x platform will be a ground-up, modern banking platform which gives us the ability, through partnerships, to begin to extend our banking capability beyond what we do in our core business,” the bank told shareholders, noting the new venture would be run separately from its existing businesses.
Westpac chief executive officer Peter King said the new service was partially to offset challenges faced in Westpac’s core business, and partly in response to changing consumer trends including the introduction of BNPL.
“Fintech innovation is changing banking in important ways and our new digital banking platform is part of our long-term strategy to support this trend and better respond to changing customer needs,” he said.
“The platform allows us to combine our banking experience with the innovation of our partners to support new customer experiences.”
With Westpac on board, Afterpay executive vice president of new platforms Lee Hatton said the company is making a concerted effort to reposition itself as a budgeting tool.
“Broadening Afterpay’s ecosystem to include new money management tools and products allows us to leverage our insights to deliver innovative solutions that meet the needs of our customers, helping them to make better-informed financial decisions and further differentiating us from traditional credit products,” he said.
While the new service is limited to Australian consumers, Mr Hatton said Afterpay is well-placed to ultimately provide the same to its 10 million-plus customer base across the world.