Citi plans to disrupt Afterpay (ASX:APT) and Zip (ASX:Z1P)

Citi wants to muscle in on the BNPL sector, putting Afterpay potentially in its sights.

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Citi is planning to disrupt the local buy now, pay later (BNPL) players like Afterpay Ltd (ASX: APT) and Zip Co Ltd (ASX: Z1P) with the launch of its own offering in Australia.

The Australian Financial Review is reporting Citi plans to attract merchants to its platform with lower merchant fee charges.

Citi Australia is the fifth biggest provider in credit cards behind Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), Australia and New Zealand Banking Group Ltd (ASX: ANZ) and National Australia Bank Ltd (ASX: NAB).

Buy now, pay later has been taking payment market share away from credit cards. But Citi wants to “introduce new buy now, pay later customers to lines of credit for larger purchases.” Citi’s key target audience is 35 to 45 year olds.

Alan Machet, chief executive of Citi Australia’s consumer arm, said:

While perceptions might be that BNPL is for a very young audience, we do in fact think this product is appealing for a broad spectrum of adults.

People are going to start there, in BNPL, from a small ticket perspective. But when they are looking to access a bigger line of credit, for things such as holidays, school fees, that is where you click over into a responsible lending line of a credit card.

The AFR said that Australia is the global test market for Citi’s buy now, pay later offering because of the high level of understanding and usage of buy now, pay later services in the country.

The initial amount that customers can use is $1,000 which will be repaid in four instalments over six weeks. For a “small fee”, consumers will be able to utilise longer-term repayment repayments or larger lines of credit.

Citi’s BNPL service can be used where MasterCard is accepted – locally or internationally – and customers can link to any deposit account.

What have the share prices of the ASX BNPL operators done today?

At the time of writing, the Afterpay share price is flat. But over the last month it has risen by more than 40%.

The Zip Co Ltd (ASX: Z1P) share price has dropped by 2% so far today. Over the last month it has gone up 15%. 

One of the other larger Australian buy now, pay later operators is Humm Group Ltd (ASX: HUM), which is currently up 0.5%.

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