Afterpay has become the first business to join Westpac’s new cloud-based ‘bank-as-a-service’ (BaaS) platform, following a deal that will see the Aussie buy now, pay later (BNPL) giant offer white-label Westpac transaction and savings accounts to its more than three million customers.

The digital-only BaaS platform provides a direct, API-connected pathway for the Westpac’s fintech and institutional partners – many of which, like Afterpay, operate without a banking licence – to tap into the bank’s products and services.

First mooted in the bank’s 2019 Annual Report last November, Westpac at the time welcomed the platform’s potential to “reach a new group of customers” and “[enhance] the service offering to their own customers”.

Then Westpac chief executive Brian Hartzer noted that the BaaS, if proven out successfully, could potentially be “folded back” into the bank’s core operating environment, helping to “drive our own costs and flexibility in a better direction”.

The BaaS was conceived by 10x Future Technologies, a UK-based cloud banking technology provider, in which Westpac took a minority equity stake last year.

Westpac chief executive, Peter King, acknowledged the rising force of fintechs and other non-bank financial services providers, recognising a need for the big four bank to pivot its resources to changing market demands.

“Fintech innovation is changing banking in important ways and our new digital banking platform is part of our long-term strategy to support this trend and better respond to changing customer needs.”

He added: “The platform allows us to combine our banking experience with the innovation of our partners to support new customer experiences.”

Upon launch, Westpac general manager of corporate and business development, Macgregor Duncan, said the new “SuperCore” platform would help “turbocharge” the bank’s customer service and acquisition.

“A modern core banking stack allows you to support customer needs with new data and AI applications, while also significantly lowering the cost-to-serve. And that’s what 10x is,” Duncan said.

“While it’s still a young technology, we see this as a way for Westpac to test and explore new capabilities that might become directly relevant to Westpac’s core business in the future.”

Westpac’s first signing to its new bank-as-a-service platform follows the launch of Volt Bank’s own BaaS platform last month, which similarly offers ‘white-labelled’ banking products, including deposit accounts, to its business partners.

Volt founder Steve Weston said that around 70 non-banks had, prior to launch, expressed interest in a potential BaaS hook-up with the neobank.

From Q2 next year, Afterpay will gain access to Westpac’s BaaS platform, allowing it to provide transaction and savings accounts and other cashflow management tools to its 3.3 million-strong Australian customer base. Being ‘white label’ accounts, they will remain on Westpac’s balance sheet and, as such, be protected by the bank’s own government deposit guarantee.

“We have built the platform to allow us to collaborate closely with our partners, and we are excited to work with Afterpay to pioneer services relevant to, and reflective of, its customer base and unique business model,” Duncan said.

Afterpay said the new partnership with Westpac will enable it to expand its range of services without “diverting” from its existing model, which for now remains centred on its BNPL service.

“[The partnership] has the potential to facilitate new revenue streams over time, without [us] needing to develop traditional banking or credit products,” the company said.

Afterpay said its new money management service offerings, which will include bill paying and cash withdrawal facilities as well as budgeting tools, will “replicate the simplicity and transparency of existing Afterpay services, offering customers greater control over their budgets”.

“We believe Australians deserve greater support and insight to help manage their money. Together with the power of our retail platform, the latest banking technology from 10x, and the support of Westpac, we will begin by offering cashflow management in a simple way,” Afterpay chief executive, Anthony Eisen said.

“Afterpay is in a unique position to extend and deepen the relationship with our customers and help them to manage their money more seamlessly through savings and budgeting tools.”

“[This] is clearly the beginning as we explore this opportunity globally.”

Consumer transaction data will also prove a valuable by-product from the Westpac partnership, with the new links between banking services and existing Afterpay accounts “[delivering] further insight into how customers prefer to manage their finances, what their savings goals are, and how responsible spending behaviour can be further encouraged and rewarded”, Eisen said.

“In deepening our relationship with our customers we will gather greater insights into how they prefer to manage their finances and better understand their savings goals. This will allow us to assist them to budget more effectively and avoid debt traps.”