Westpac will offer its credit card customers more flexible payment options with the introduction of PartPay, a feature which enables them to pay for purchases in four instalments.
In coming months, customers will be able to link their existing credit card to a PartPay digital card via the Westpac app. Payments with the card will be split into an initial instalment, followed by a further three fortnightly instalments, each automatically deducted from the customer’s nominated Australian bank account.
If a payment is missed, the instalment is transferred to the credit card purchase balance, with the standard interest rate applied. PartPay can only be used for transactions over $100.
“Customers have told us that they want more flexibility with their payments, especially for items where they may not be able to cover all of the cost up front,” Steve Rubenstein, managing director, consumer finance at Westpac, said in an interview with Wire.
“PartPay shares the same credit limit as your credit card, so you’re not taking on additional credit responsibilities,” he added.
The new card complements Westpac’s existing offers for customers, including the recently announced partnership with ShopBack, which rewards customers with bonus cashback when they make purchases using their Westpac debit and credit card.
“We know that the ‘Buy Now, Pay Later’ market particularly resonates with younger customers,” Rubenstein said. “PartPay builds on what we’ve done with ShopBack in creating and building out our propositions to be even more attractive to that younger customer demographic.”
The announcement comes as the government considers steps to tighten regulation of the BNPL sector.
In an published in November, the Treasury acknowledged the benefits to consumers from BNPL in “improving financial inclusion by being cheaper and more convenient to consumers than many other competing products.”
However, it also said that discussions with a broad range of interest groups had identified that BNPL’s relatively loose regulatory environment, combined with the industry’s rapid growth, “may be contributing to poor consumer outcomes.”
Of the three options for regulation proposed by the Treasury, Westpac’s submission came out in favour of the toughest, which would require all BNPL providers to get an Australian Credit License - not something they are currently obliged to hold.
Under that option, the sector would also be subject to responsible lending obligations under the Credit Act, which includes a requirement to make reasonable inquiries into a consumer’s financial situation, and take steps to verify the information.
“Our position is to consider BNPL as a form of credit, and therefore it should be subject to the same standards as other forms of credit,” Rubenstein said. From that starting point, there could then be a discussion around the idea of proportionality, and how the requirements should be applied to lower risk customers or lower risk credit, he added.
PartPay will only be available to customers who have been approved for a credit card, and as such will have already been through extensive credit and repayment checks.
“What responsible lending obligations are meant to do is ensure that customers can afford the credit line that they’re taking out without going into substantial hardship,” Rubenstein said.
There will be no fee or charge for using PartPay, except for foreign transaction fees, and there will be no late payment fee if an instalment is missed.
As for the future, Rubenstein is open minded about the potential to add more features to PartPay.
“The market for instalment-based purchases continues to evolve, so we’re keeping a watching brief. It’s possible over time we might have longer fortnightly instalment plans delivered through PartPay or other flexibility or control features added to our credit card products.”
The SmartPlan feature is also available on Westpac’s credit cards, which provides longer-term monthly instalment plans for transactions done previously (fees apply).