Westpac to offer young customers ‘subscription credit’

Westpac has joined National Australia Bank and Commonwealth Bank of Australia in offering a no interest credit card that will target the buy now, pay later sector’s Millennial customers, who tend to avoid high-rate cards with big credit limits.

A year after its two rivals announced similar products and five years after Afterpay started to scale, Westpac said its new card Flex will help improve traction with younger customers, a segment where Westpac remains badly underweight.

“We see less appetite for revolving credit in younger demographics,” said Westpac’s chief executive of consumer and business banking, Chris de Bruin. “Folks want to go into subscription credit rather than interest-bearing balances.”

The Flex card (which will be available as a piece of physical plastic but mostly will be provided into digital wallets) will have a $1000 credit limit and charge a flat, $10 monthly fee. But this will not be levied if users pay the amount owing the previous month on time.

There will be no interest, no late payment fees and no foreign currency fees. It will be the first Westpac product to use a new digital onboarding process that it intends to roll out more broadly.

Westpac is providing bank accounts for Money by Afterpay under a banking-as-a-service deal and has watched the growth of the buy now, pay later sector as a previous investor in Zip, but Flex is the first customer-facing response.

The interest free offering comes after CBA launched its Neo card in September last year, the day after National Australia Bank’s StraightUp card was unveiled. Neo, which charges a monthly fee of between $12 and $22 depending on the credit limit, now accounts for one-third of new CBA credit card applications.

The latest payment data from the Reserve Bank of Australia shows debt on personal credit cards at $18.32 billion, down 11.2 per cent year-on-year and the lowest level since January 2004. However, the value of transactions were $20 billion in August, up 5 per cent on same month last year.

Customers wanting to shop online or pay digital subscription fees should be attracted to Flex as a payments card, rather than a revolving debt facility, said Mr de Bruin, who suggested banks need to do a better job of defending the advantages of credit cards.

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