Tuesday 20 August 2019
Launched this week in partnership with online retailer Kogan.com, Citi Australia’s instalment loan offering is the latest product in the Aussie market to give customers the option of making delayed payments without fear of hefty interest bills.
Aussies taking advantage of the offering can choose to pay back the loan over 3, 12, 18 or 24 months.
And instead of interest, they are charged a one-off fee calculated as a percentage of the purchase price. These fees, according to Citi, span from 0.4% for a three-month loan, to 2% for a one-year loan, to 5% for an 18-month or 24-month loan.
Unlike popular Buy Now Pay Later service Afterpay, the instalment loan is only available to customers with a Citi credit card, and they’ll be able to access any of the offers as long as it’s within their existing credit limit.
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According to Citi’s survey last month, two-thirds of Aussies are worried about their credit card debt, with millennials the most concerned of the bunch.
Meanwhile, an ASIC report last year found the number of Aussies using Buy Now Pay Later has skyrocketed by 1.6 million - or five-fold - in two years, from 400,000 in 2016 to 2 million in 2018.
“This highlights that consumers want more ways to manage their payments, and we’re proud to be the first bank in Australia to enter this sector,” Citi’s Head of Cards and Loans, Choong Yu Lum said.
“We think it’s great for consumer choice that there are a number of players offering Buy Now Pay Later options. At Citi, we aim to target those consumers who are more comfortable using a traditional lender.”
In fact, Citi’s survey shows there are growing calls among Aussies for banks to join the Buy Now Pay Later space, currently dominated by fintechs like Afterpay and ZipMoney.
Over half of the respondents said they would rather use Buy Now Pay Later with a bank than with a fintech.
Zeroing in on the numbers, 58% said they would place more trust in instalment plans if a traditional provider offered them, compared to only 23% who believed they could rely on non-traditional providers for these services.
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And Citi isn’t the only bank taking interest in the Buy Now Pay Later sector. Just this month, Commonwealth Bank said it would invest US$100 million in Klarna, a rival to Afterpay in the US market, and become the fintech’s exclusive partner in Australia.
Latitude Financial also recently announced the launch of Latitude Pay, an interest-free credit option for Aussie shoppers which is set to be released next month.
Meanwhile, Westpac has dived into the Buy Now Pay Later market with a credit card feature called SmartPlan, which allows customers to pay off their debt or purchases through monthly instalments. And running along a similar tangent, ING’s Orange One Credit Card lets you pay for your items in set instalments at a lower interest rate.
Curious about what other storms are brewing in the world of fintech? Head over to our fintech hub for all the latest articles and a look at other Buy Now Pay Later options on offer.