Australian buy-now-pay-later firm Afterpay Ltd will team up with Westpac Banking Corp to offer savings accounts, the two companies said on Tuesday, signalling a shift by the alternative credit firm into mainstream banking.
The accounts will be available to Afterpay's three million-plus customers in Australia from next year through Westpac's digital banking platform, and will help give the firm greater insight into its customers' financial habits, it said.
The announcement sent Afterpay's shares up 6% and past the A$100 mark for the first time, highlighting the staggering rise for a stock that was at just A$8 in March.
For Westpac, which last month reached a record A$1.3 billion settlement with Australia's financial crime agency for allowing illicit payments, the venture marks a push into fintech and will help it target younger customers.
Afterpay will be Westpac's first digital banking platform customer, and the Melbourne-based firm will also offer budgeting tools and other services over time. The partnership goes live in the second quarter of 2021.
Afterpay and its buy-now-pay-later peers, who let users buy goods and pay over interest-free instalments, have been heralded as disruptors of traditional credit and have surged in popularity as the coronavirus crisis accelerates the shift online.
RBC Capital Markets analyst Tim Piper said in a note that processing repayments through Westpac could lower costs for Afterpay, while more customer data could result in "better credit decisioning and potentially lower loss rates."
While Afterpay currently does not conduct credit checks on its customers, it says the tie-up opens the door to new revenue streams and could be adopted globally.
"We will gather greater insights into how they (customers) prefer to manage their finances and better understand their savings goals," Afterpay Chief Executive Anthony Eisen said.
Rival Zip Co Ltd also on Tuesday expanded its in-store offering for users to any store that accepts Visa, widening the company's presence.
(Reporting by Nikhil Kurian Nainan and Anushka Trivedi in Bengaluru; Editing by Cynthia Osterman and Richard Pullin)
