Buy now, pay later fees are too high, says CBA’s Matt Comyn

LACHLAN MOFFET GRAY

SEPTEMBER 4, 2020

The Australian

The merchant fees that buy now, pay later platforms charge retailers are not sustainable, according to Commonwealth Bank chief executive Matt Comyn, who pointed to regulatory pressure that may see costs for businesses to use the platforms decrease over time.

Speaking to the House Standing Committee on Economics on Friday, Mr Comyn was asked by deputy chair Andrew Leigh whether he thought that typical merchant fees of 5-6 per cent charged by services like Afterpay and Klarna, which Commonwealth Bank owns part of, were sustainable in “the medium term”.

“No, I don’t,” answered Mr Comyn, pointing to Reserve Bank concerns.

“I mean, if you think about credit cards — and understandably the central bank and the governor’s been very focused on making sure that payments are low cost in Australia and it’s a low cost of doing business for small businesses — and credit cards, as you mentioned, interchange (fees) have actually come down 50 basis points,” he said.

“That would be about a fifth of interchange in the US, which has clearly weakened the proposition for credit cards, but it gives you the overall trajectory of interchange and the cost to small business.”

Mr Comyn said Commonwealth Bank’s decision to buy a 5 per cent stake in the Swedish buy now, pay later heavyweight Klarna, which has more than 90 million customers worldwide, was driven by a need to provide a range of payment options to Australian customers.

“Clearly we saw a strategic gap or opportunity there with the growth of buy now, pay later. It certainly well exceeded our expectations from many years ago,” Mr Comyn said.

“We also see that payment innovations are going to be one of the most important areas of financial services globally, so we see our investments in Klarna as being more than buy now, pay later … we see it much more about working closely with them and exclusively in Australia and New Zealand to develop innovative payment experiences to benefit our customers.”

Mr Comyn said that although “businesses are effectively funding the buy now, pay later opportunity,” the platforms provided benefits to businesses who signed up.

“They are providing a channel, an acquisition channel for new customers, they are helping to increase basket size, a whole range of different features and benefits.”