Afterpay to shut Westpac-backed banking app

Buy now, pay later (BNPL) player Afterpay is shutting down its Westpac-backed banking app less than a year after launching it, as its new US owner gets ready to introduce its own finance app in Australia.

Afterpay on Friday said it would stop accepting new customers to its youth-focused app Money by Afterpay, which provides transaction and savings accounts, using Westpac’s banking licence and technology. The app will close in October, and Westpac said it would help customers move their funds to other banks.

Afterpay said it would focus on the Cash App, which is owned by its parent company.Credit: Louie Douvis

The decision to close the app is the result of the takeover of Afterpay by US fintech giant Block, run by Twitter co-founder Jack Dorsey, which announced a record-breaking $39 billion deal to buy Afterpay just over a year ago.

Block has previously said it wants to introduce its popular Cash App - which provides consumers with services including payments, investments, and cryptocurrency trading - in Australia. The Cash App is a critical part of Block’s business, alongside its merchant payment business Square, and it views Australia as a priority market due to Afterpay’s strong local presence.

Westpac, meanwhile, had been working with Afterpay as part of a push into what is known as “banking as a service” (BaaS) - where banks rent out their infrastructure and banking licence to other businesses, such as retailers or tech firms.

Block has not provided details about when it will launch the Cash App in Australia, but Money by Afterpay lead Lee Hatton said this was the reason why it was ending the Westpac partnership.

“Our decision to move in this new direction is due to our exciting next chapter with Block, particularly as we think about Cash App opportunities here in Australia, and we wish the Westpac team and its growing list of BaaS customers continued success,” Hatton said.

Afterpay provides short-term interest-free instalment loans to shoppers as an alternative to credit cards, and its partnership with Westpac was an attempt to diversify and grow by selling a wider range of financial products.

Afterpay had previously signalled it had long-term ambitions of selling mortgages through the app, while analysts had predicted it could also provide share trading and cryptocurrency trading.

However, the takeover by Block has changed the company’s strategy. Block is also arguably a more direct competitor with Westpac than Afterpay was before the buyout.

A plunge in the valuations of fintechs such as Block has also forced the industry to slash spending and cancel peripheral products, as companies focus on their core business and try to move into profitability.

The chief executive of Westpac’s banking as a service business, Damien MacRae, said the bank had learnt valuable lessons through its partnership with Afterpay, which used a new banking platform owned by Westpac called 10x.

“A change of ownership naturally sees partnerships evolve, and we have been working co-operatively with Afterpay on this transition to ensure a smooth customer pathway,” MacRae said.

Westpac has not disclosed the value of deposits that it attracted through its brief Afterpay partnership.

Block shares, which are dual-listed in the US and on the ASX, were up 1.3 per cent to $106.31 in early trading. Westpac shares had gained 0.4 per cent to $21.69.

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