Article “CBA responds to Stripe, unveils e-commerce service for retailer”, published by the Australian Financial Review, James Eyers (Senior Reporter), 2 December 2022. View article here.
Commonwealth Bank will roll out a new “payments orchestration” service for business customers next year, a move that shows its desire to take on Irish-American fintech giant Stripe and wrest back valuable transaction data from buy now, pay later operators like Afterpay.
The creation of PowerBoard, as the product will be known, is also an example of CBA expanding beyond traditional banking products as a defensive move against disruptors looking to use payments as a foray into business lending.
CBA group executive of business banking Mike Vacy-Lyle said the bank wanted to simplify payments for customers and let them choose the services they would like to use. The bank also intends to stay in the middle of transactional data flows, which are used to assess customer risk and decide whom to lend to.
“This augments our data and will lead to more lending opportunities on the back of that data,” he said. “It’s a line of data we potentially didn’t have – and now we can get that back.”
CBA Head of Business Banking, Mike Vacy-Lyle.
Buy now, pay later services like Afterpay have obstructed banks’ view of the products being sold by merchant customers because the buy now, pay later provider typically appears as the “merchant of record” when transactions are made.
But when buy now, pay later providers or PayPal are connected to PowerBoard, CBA will get full visibility of transaction data, an increasingly valuable commodity in banking.
PowerBoard has been built in partnership with Paydock, a start-up initially set up in Australia before it shifted to Britain. The service makes it easy for retailers to take payments from various sources, including traditional debit and credit cards, buy now, pay later, digital wallets like Apple Pay and Google Pay, eftpos, PayTo and digital gift cards.
It will also provide e-commerce services such as logistics management, fraud protections, ticketing and multi-currency transactions.
CBA created the service in response to internet-focused, specialist e-commerce players – including Square, which is now owned by Block (which also owns Afterpay), and Stripe, a San Francisco-based player founded by Irish brothers whose customers include Zoom, Salesforce, Spotify, Uber, Atlassian, Xero and Scentre Group.
“We have been pitching for a quite lot of e-commerce business of late and found ourselves up against the Stripes and Shopifys of the world, and we quickly understood that flexibility to put decisions in the hand of the merchant is what [customers] are really after,” Mr Vacy-Lyle said.
Stripe, a private company valued at $US95 billion ($140 billion), has not revealed total Australian user numbers but said earlier this year 100,000 new businesses joined in Australia and New Zealand last year.
In addition to payments services, Stripe has developed software that creates new companies, provides tax services, offers fraud protection, and creates tools for financial reconciliation and back office management.
Stripe, founded by Patrick and John Collison, has also been exploring banking opportunities in Australia via partnerships. Offshore it offers financial services to its platform customers, including Shopify, through partnerships with the likes of Goldman Sachs, Citibank and Barclays.
CBA’s move is also a competitive response to Square, which offers a suite of software to small businesses as well as small, mobile payment terminals that CBA has also copied. Square has been using its payment terminal business to create payment data to offer cash-flow financing via Square Capital.
Mr Vacy-Lyle said CBA would target Stripe and Square customers with PowerBoard.
“We want to make sure we maintain and grow that primacy of relationship, so we are absolutely going to put this into existing customers and acquire new customers on the back of this,” he said.
When PowerBoard is rolled out next year, CBA said its customers would be able to plug in with a single API (application programming interface) connection. This would allow merchants to quickly connect to Afterpay, Zip, PayPal and Klarna when they individually decide to use those services.
The deal also points to CBA’s desire to take on National Australia Bank. CBA is No.2 to NAB in business lending, and is keen to chase it down. CBA is already No.1 on other business banking measures, including transaction accounts and volumes of payments processed through the fast payment system.
CBA has made other forays into e-commerce, including investing in start-up Little Birdie, partnering with BigCommerce (a Shopify competitor), and taking an equity stake in Klarna, a global buy now, pay later provider, which has been under pressure this year amid a slump in valuations.
Paydock chief executive Rob Lincolne said partnering with CBA was compelling and aligned to its vision “to offer the greatest benefit to as many merchants as possible … The time is right to see orchestration as the new market default.”