The relationship between Westpac Banking Corp (ASX: WBC) and Afterpay Ltd (ASX: APT) is in question after the Square acquisition news.
What’s going on with Westpac and Afterpay?
A few weeks ago the buy now, pay later business announced some details about its new money and lifestyle app ‘Money by Afterpay’ which will begin its rollout with an Australian staff trial.
That was the start of Afterpay’s collaboration with Westpac ten months after it was launched. Afterpay is targeting a full Australian consumer launch in October 2021.
Customers will be able to make it their primary money management app. It will display things like their buy now, pay later balance, upcoming orders and instalments alongside their daily spending account and savings accounts. The goal is to give customers a single, seamless view of their finances.
Part of that collaboration is that Afterpay will allow customers to have up to 15 savings accounts with a saving rate of 1%. Powered by Westpac.
Square deal causes a shift in thinking
According to reporting by the Australian Financial Review, Westpac is now not as keen to work with Afterpay considering it’s going to be bought by Square.
The major bank is concerned because of Square’s potential plans to disrupt more of Westpac’s business – lending to smaller businesses and capturing market share of transaction fees (Square supplies payment terminals). The AFR reported that payments data can help assess lending risk and create relationships leading to loans.
At this stage, it’s reportedly too early for Westpac to decide what to do about it. The bank wants to work with Afterpay because of its younger demographic and the potential for links with future borrowers.
But if Westpac were to cut the relationship, Afterpay would likely still be able to get the app going because it could just work with another financial provider.
Summary thoughts on Westpac and Afterpay
Both Westpac and Afterpay have their growth plans. Time will tell if they’re successful.
But both of them are seeing rising competition. Afterpay is seeing players like PayPal, Apple and Commonwealth Bank of Australia (ASX: CBA) enter the field. Whilst Westpac is seeing these fintechs steadily encroaching on their territory and profit.
There are other ASX growth shares I’d rather look at for my portfolio.
