The Commonwealth Bank is tipping an expansion of the concepts underpinning ‘buy now, pay later’ (BNPL) beyond retail purchases to other areas of financial management like bill and salary smoothing.

BNPL is, in some circles, characterised as a way to smooth out expenses over time, by letting consumers split financial commitments into smaller installments.

CBA earlier this year backed Swedish BNPL operator Klarna’s entry into the Australian market, providing an alternative to local operators like Afterpay and Zip.

Its general manager of payments and the data economy Albert Naffah told a ThoughtWorks-run event this week that he saw considerable growth opportunities emerging in the BNPL space.

“I don’t think we’ve seen yet the beginning even of the whole buy now pay later phenomena,” Naffah said.

“It’s essentially still playing in a fairly narrow part of the economy in retail.

“I think you’ll start to see these sorts of services pop up in a whole bunch of other niches. You already hear things like bill smoothing so utility payments.

“Salary smoothing as-a-service will probably also become something much more prevalent, particularly as the gig economy and the casualisation of the workforce increases, and people don’t have regular working hours, so they will need to access funds perhaps more regularly than every fortnight or every month.

“So there’s many areas you can delve into but I expect that you’ll continue to see a bunch of innovation in those areas over the next couple of years.”

Bill smoothing is already offered directly by individual utilities providers such as AGL and Origin Energy. 

BNPL players like Zip [pdf] also allow bill smoothing to be performed more in aggregate, as Naffah’s comments suggest will become more popular.

Meanwhile, the lumpiness of gig worker incomes is a budgeting challenge other financial players have also tried to solve. 

Mastercard, for example, said it was looking at other ways to solve gig workers’ cash flow challenges last year.

Naffah said in the core retail space, BNPL continued to grow despite a broader economic environment in which “retail and luxury spend is depressed”.

“I think the latest measure is that [BNPL accounts for] 2.6 percent of all debit card spend,” he said.

“We expect that to double, if not triple, over the next two to three years, obviously at the expense of credit card spend, which is in a structural decline.”

Mobile payments continue to rise

Naffah also highlighted the “acceleration” in mobile payments and digital wallet use, particularly since the early stages of lockdown.

Contactless payment methods have generally risen in prominence over the period, in part because they offer a potentially more hygienic option than paying with cash or punching details into a physical terminal at the point of sale.

“The real acceleration in the use of mobile, of tokenized transactions, has really been noticeable particularly since March since the early stages of the lockdown,” Naffah said.

“As more stores have increased the contactless [purchase] limit, and as a bank we put out comms to our own customers telling them they could avoid putting in a PIN for any value of transaction if they use their digital wallets, they’ve taken that up in droves.

“Debit has been the biggest beneficiary of that. More than a third of our debit contactless transactions are now conducted with a mobile phone, and that’s more than doubled as a proportion over the last six months.”

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