Australia-based bank Westpac has announced its entrance within the buy now, pay later (BNPL) space with a product designed to withstand regulatory scrutiny. The announcement comes at a time when the Australian government is working to decide on how strictly to regulate BNPL providers, and the bank joins the Commonwealth Bank of Australia and National Australia Bank in taking on the industry with the unveiling of its new ‘PartPay’ feature, which is set to enable credit card users to pay in four instalments, should they choose to do so.

Westpac’s BNPL offering capabilities As detailed by the Australian Financial Review, Westpac’s managing director of consumer finance, Steve Rubenstein stated that the decision to go via the credit card as opposed to providing the service through merchants was made in response to the needs of the customers, rather than to drive profits. As per their statement, the research that the company has seen details that approximately 40% of customers that leverage BNPL, have also made use of their credit card throughout the year. Based on the announcement information, the product is set to enable existing Westpac credit card customers to select to pay in four instalments, with no interest, provided that they carry out the payment for the first quarter upfront and that they then make three fortnightly repayments.

Should a payment be missed, the amount would then be sent to their existing credit card, with the option set to be available within their existing credit card limit. Regulating BNPL in Australia In November 2022, the Treasury made public a call for submission to assist with the developments of the Federal Government’s regulatory framework for BNPL, having released an options paper that aimed to address the BNPL industry, which has not been regulated as other consumer credit forms under the National Consumer Credit Protection Act 2009 (Credit Act). The options paper, Regulating Buy Now, Pay Later in Australia set out three alternatives for regulating BNPL, each with differing control degrees: Option 1: Strengthening the BNPL Industry Code plus an affordability test.

This will impose an affordability assessment for BNPL providers under the Credit Act and address regulatory gaps in a strengthened Industry Code to make it fit for purpose. Option 2: Limited BNPL regulation under the Credit Act. BNPL providers would be required to obtain and maintain an ACL, as well as introduce modified Responsible Lending Obligations (RLOs) under the Credit Act to determine unsuitability, combined with an improved Industry Code.

Option 3: Regulation of BNPL under the Credit Act, with full RLOs. BNPL providers would be required to obtain and maintain an ACL. The existing RLOs in the Credit Act will be applied to all BNPL credit, including requirements around inquiries into the financial situation of a consumer and taking steps to verify this information.

As per announcement information, Westpac has been vocal in regard to the regulation of BNPL-like products, and the company has stated in its submission to the government that the regulation should start with the third, most drastic option of the three proposed, with officials advising that their perspective on this option results from their belief that BNPL-type products are a form a credit and a credit obligation. The bank’s view is that all forms of credit have a starting goal, that of having customers responsibly approved with the understanding that they can make the payments. .