Westpac has signed Afterpay as the first user of its new cloud-based bank-as-a-service platform, upon which Afterpay will offer savings accounts and cash flow tools to Australian customers.
The bank-as-a-service platform takes its foundations from 10x Future Technologies, a UK-based startup that Westpac partnered with late last year.
Bank-as-a-service enables “businesses without a banking licence to deliver banking services from a licenced bank digitally via APIs,” Westpac said at the time.
The first to do this will be buy now pay later (BNPL) operator Afterpay, Westpac said in a financial filing on Tuesday morning.
“The partnership will allow Afterpay to provide Westpac transaction and savings accounts and other cash flow management tools to its 3.3 million customers in Australia in Q2 2021,” Westpac said.
“We look forward to working with Afterpay to deliver new products and services,” Westpac CEO Peter King said.
Afterpay said in its own filing that the “new money management services … will compliment [its] existing business model by offering additional, customer-centric alternatives to traditional banking products”.
“The new offerings will replicate the simplicity and transparency of the existing Afterpay service and will empower customers to have greater control over their budget,” Afterpay said.
Afterpay said its customers would be able to use the savings account functionality “to conduct the majority of their money management activities, including paying bills, withdrawing cash, and budgeting”.
“Further services and tools will be introduced over time,” it said.
In addition, Afterpay said that linking the banking services to an existing Afterpay account “will deliver further insight into how customers prefer to manage their finances, what their savings goals are, and how responsible spending behaviour can be further encouraged and rewarded”.
Afterpay hinted that this would be the case: “The collaboration … brings efficiency benefits to Afterpay’s existing activities from a risk management and processing cost perspective.”
CEO and managing director Anthony Eisen offered a more pointed assessment.
“In deepening our relationship with our customers, we will gather greater insights into how they prefer to manage their finances and better understand their savings goals,” he said.
“This will allow us to assist them to budget more effectively and avoid debt traps.”
Afterpay also said the deal with Westpac meant it could expand into new services without “diverting” from its existing model.
“[This] has the potential to facilitate new revenue streams over time, without [us] needing to develop traditional banking or credit products,” the company said.
The fact that the Westpac bank-as-a-service platform uses technology from a UK-based company could also eventually enable Afterpay to offer the same services in all markets in which it operates.
“The advanced core technology available around the world today means we are well placed to ultimately provide these services to our 10 million-plus customers across our global footprint,” Afterpay’s executive vice president of new platforms Lee Hatton said.