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‘Similar to ordering a pizza’: how buy now, pay later apps influence young people’s spending

<p>Young people are often blamed for making <a href="https://www.theaustralian.com.au/life/weekend-australian-magazine/moralisers-we-need-you/news-story/6bdb24f77572be68330bd306c14ee8a3">irresponsible choices</a> with money.</p> <p>But the real issue is not whether they eat too many <a href="https://www.theguardian.com/news/datablog/2016/oct/18/are-millennials-actually-bad-at-saving-or-are-houses-just-unaffordable?CMP=share_btn_fb">expensive cafe breakfasts</a>. Young Australians today face an uncertain job market, rising university fees and astronomical house prices. Unfortunately, <a href="https://theconversation.com/home-ownership-falling-debts-rising-its-looking-grim-for-the-under-40s-81619">debt</a> is also an inevitable part of their lives.</p> <p>This comes amid a huge rise in the number of “buy now, pay later” apps, such as <a href="https://theconversation.com/explainer-how-lending-startups-like-afterpay-make-their-money-86477">AfterPay</a>, and <a href="https://www.news.com.au/finance/money/costs/ripoff-financial-experts-warn-of-the-dangerous-trap-of-payday-loans/news-story/1471cc4a61594cdb9e7a724a76e534d7">payday loan apps</a>, such as <a href="https://www.abc.net.au/news/2020-08-18/payday-lending-consumer-risk-coronavirus-financial-hardship/12549412">Nimble</a>. It is possible to make purchases online with the the tap of a button, even if you don’t have the money in your account or on your credit card. It is also possible the able to borrow money <a href="https://www.abc.net.au/triplej/programs/hack/whats-up-with-payday-loans/7794806">within minutes</a>.</p> <p>To better understand how young people negotiate debt, we interviewed 31 people aged between 18 and 29 in the Newcastle and Hunter Valley area in 2020 and 2021. We asked them how they access credit and their views on different kinds of debt.</p> <h2>Our study</h2> <p>Our participants saw debt as a necessity if they are going to have an acceptable life in the present and plan for the future. As Steph, a 22-year-old university student, said:</p> <blockquote> <p>Large debts like the mortgage, the HECS debt […] things like that I suppose in a sense it’s useful debt. It makes sense and it gets you further by doing it because there’s still an equity in what you’re doing … It follows you not nearly as badly as some other debts.</p> </blockquote> <p>Young people also made distinctions about the way debt feels and how approachable it is. They acknowledged short-term consumer debts may not be “good”, but felt they were also part of being able to buy the things and have the experiences associated with being young.</p> <p>Those we interviewed talked about AfterPay (where you pay off the debt in four installments) as an everyday part of life. As Alexa, a 23-year-old university student, told us:</p> <blockquote> <p>AfterPay is for just those little wants that I don’t want to pay for up front.</p> </blockquote> <p>They also described it as a low-risk and almost friendly way to buy things. This was particularly when compared to a bank. Alice, a 21-year-old sales assistant, put it this way:</p> <blockquote> <p>AfterPay is like, ‘Oh, just pay this off in four quick things and you can have your item. We’ll send it out.’ But then banks are like, ‘If you don’t pay this back, you’re going to get so much interest and it’s going to suck, and you’ll have the sheriffs roll up at your house and you’re going to be sad.’</p> </blockquote> <h2>Like ordering a pizza</h2> <p>Interviewees attributed some of this friendliness to the process of accessing the money or goods. Mia, a 21-year-old paralegal, described applying for a small loan on the Nimble app:</p> <blockquote> <p>When you apply for the money […] you can track at any point on it. The Nimble app is so similar to ordering a Domino’s pizza […] Whereas a credit card through a banking app, it’s nothing like that […] They send me letters and even opening the mail terrifies me, nothing good comes via snail mail ever.</p> </blockquote> <p>The online, easy nature of these loan services closely relates to how young people engage with information more generally in their lives. In this sense, there is a familiarity and comfort to the way they work.</p> <p>As Mia continues:</p> <blockquote> <p>[It’s] positive, it’s not daunting, it’s informative, it’s instantaneous. The second the money comes out, I get a thank you email and a notification on the app. It’s like, ‘you have this many payments left, this is how much you’ve paid, this is how much you have left to pay, you will still be paid in full by this date’. I don’t have any of that with my credit card.</p> </blockquote> <h2>Familiar tactics</h2> <p>Inteviewees also spoke of how services like AfterPay and short-term loan apps used similar tactics to social media platforms to encourage increased engagement and make the experience feel informal and even social.</p> <p><img src="https://images.theconversation.com/files/429684/original/file-20211102-10001-letons.jpg?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=754&amp;fit=clip" alt="Young people using their phones and laptops." /> <span class="caption">Applying for a loan via an app does not involve ‘scary’ paperwork, according to interviewees.</span> <span class="attribution"><span class="source">www.shutterstock.com</span></span></p> <p>These include “on this day” reminders (such as, “this time last year, you bought this pair of shoes”) and waiting time indicators. There are also <a href="https://theconversation.com/gamification-status-you-score-ten-points-for-reading-this-article-5068">game elements</a>, including “rewards” for early repayments.</p> <p>Interviewees were aware this was manipulative. Lilian (26) works at a chain clothing store and was “rewarded ” for paying off a purchase early.</p> <blockquote> <p>I got this thing the other day saying that my first payment [on a new purchase] is actually going to come out [later] now. Of course, I’ve been rewarded for paying everything off early [before] […] Yeah it’s like it’s delaying it, it’s not an issue now, but it’s going to be an issue in two weeks’ time.</p> </blockquote> <h2>What next?</h2> <p>Our interviewees may see debt as a necessity, but they are also aware they have (some) choices within this. So they prefer to go with providers or platforms that feel less threatening, especially as using “buy now, pay later” services sometimes does not feel like being in debt.</p> <p><img src="https://images.theconversation.com/files/429686/original/file-20211102-25-9gi5ho.jpg?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=754&amp;fit=clip" alt="Young man on his phone with a coffee." /> <span class="caption">Young people see debt as an inevitable part of life, according to new research.</span> <span class="attribution"><span class="source">www.shutterstock.com</span></span></p> <p>There is a need for <a href="https://www.smh.com.au/national/calls-for-tighter-regulation-as-buy-now-pay-later-costs-mount-20210610-p57zuc.html">greater regulation</a> of the ways these products are promoted. It should always be made clear that this is a form of debt, not just a way to pay.</p> <p>Beyond, this, instead of “<a href="https://www.theguardian.com/news/datablog/2016/oct/18/are-millennials-actually-bad-at-saving-or-are-houses-just-unaffordable?CMP=share_btn_fb">blaming</a>” young people for their spending habits, we need a better understanding of the economy and society they are living and working in. And how debt it is all but inevitable for people on low wages, with poor job security and insecure housing.</p> <p><span><a href="https://theconversation.com/profiles/steven-threadgold-167968">Steven Threadgold</a>, Associate Professor, Sociology, <em><a href="https://theconversation.com/institutions/university-of-newcastle-1060">University of Newcastle</a></em>; <a href="https://theconversation.com/profiles/david-farrugia-243862">David Farrugia</a>, Senior Lecturer, School of Humanities and Social Science, <em><a href="https://theconversation.com/institutions/university-of-newcastle-1060">University of Newcastle</a></em>; <a href="https://theconversation.com/profiles/julia-coffey-129629">Julia Coffey</a>, Senior Lecturer in Sociology, <em><a href="https://theconversation.com/institutions/university-of-newcastle-1060">University of Newcastle</a></em>; <a href="https://theconversation.com/profiles/julia-cook-869068">Julia Cook</a>, Lecturer in Sociology, <em><a href="https://theconversation.com/institutions/university-of-newcastle-1060">University of Newcastle</a></em>; <a href="https://theconversation.com/profiles/kate-davies-290466">Kate Davies</a>, Human Services Lecturer, <em><a href="https://theconversation.com/institutions/university-of-newcastle-1060">University of Newcastle</a></em>, and <a href="https://theconversation.com/profiles/kate-senior-1284499">Kate Senior</a>, Associate Professor, <em><a href="https://theconversation.com/institutions/university-of-newcastle-1060">University of Newcastle</a></em></span></p> <p>This article is republished from <a href="https://theconversation.com">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/similar-to-ordering-a-pizza-how-buy-now-pay-later-apps-influence-young-peoples-spending-170024">original article</a>.</p> <p><em>Image: Shutterstock</em></p>

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Afterpay enters Aussie pubs, experts warn of “debt spiral”

<p><span style="font-weight: 400;">Afterpay – the popular buy now, pay later (BNPL) service – has made the jump from retail stores to over 160 Aussie pubs.</span></p> <p><span style="font-weight: 400;">But consumer advocates are worried that the move could send some people into a “debt spiral”.</span></p> <p><span style="font-weight: 400;">Australian Venue Co (AVC) has become the first hospitality group to partner with Afterpay as part of its ‘Dine Now, Pay Later’ offering – which rolls out across its venues from November 15.</span></p> <p><span style="font-weight: 400;">AVC CEO Paul Waterson said the decision was driven by customer demand, who he said have shifted away from credit cards, as well as a desire to offer convenient experiences for guests, </span></p> <p><span style="font-weight: 400;">“We’re not afraid to go first. As a group, we seek out other industry leaders who we can work with to innovate on behalf of our customers,” he said.</span></p> <p><span style="font-weight: 400;">“We are looking forward to our guests being able to choose an alternative, innovative way to pay for dining out at our pubs.”</span></p> <p><span style="font-weight: 400;">However Katherine Temple, the policy and campaigns director at the Consumer Action Law Centre, said the centre has seen more people struggling with BNPL debts, making the move from AVC all the more concerning.</span></p> <p><span style="font-weight: 400;">“Often buy now, pay later is part of a larger debt so people are also struggling with existing credit card debts or personal loans or utility loans, so it’s rarely the only type of debt when they come to us,” she told </span><em><a rel="noopener" href="https://www.news.com.au/finance/money/costs/afterpay-moves-into-hospitality-with-australian-venue-co/news-story/b569dcf94efcde0e5eef2ba79852c24f" target="_blank"><span style="font-weight: 400;">news.com.au</span></a></em><span style="font-weight: 400;">.</span></p> <p><span style="font-weight: 400;">“The debt varies but it can be [from] a couple of thousand dollars up to tens or hundreds of thousands of dollars of debt and we are hearing from people of all ages and walks of life that are using these products now.”</span></p> <p><span style="font-weight: 400;">James Hunt, a policy advisor at Financial Counselling Australia, told </span><a rel="noopener" href="https://www.goodfood.com.au/eat-out/news/twobeer-pub-trip-or-sixweek-hangover-afterpay-comes-to-the-pub-20211104-h1zlwk" target="_blank"><span style="font-weight: 400;">Good Food</span></a> <span style="font-weight: 400;">that Afterpay and other BNPL companies aren’t required to check if customers can afford the repayments, “so unfortunately many people are ending up with unmanageable debt”.</span></p> <p><span style="font-weight: 400;">Ms Temple shares those concerns, citing a lack of safeguards “to ensure people can afford to make repayments”, which she says exacerbates “financial hardship and money problems”.</span></p> <p><span style="font-weight: 400;">“Buy now, pay later is everywhere now and is normalising debt particularly for younger people,” she said.</span></p> <p><span style="font-weight: 400;">A spokesperson for Afterpay said the company enters new consumer markets based on demand.</span></p> <p><span style="font-weight: 400;">“As credit cards steeply decline, Australians are looking for smarter ways to manage their budget, using their own money, and avoiding interest and debt traps,” they said.</span></p> <p><span style="font-weight: 400;">They also said the Afterpay’s product has built-in spending rules to ensure customers don’t pay interest or revolve in debt.</span></p> <p><span style="font-weight: 400;">“Customers are unable to continue using Afterpay if they are late on a single instalment,” they added.</span></p> <p><span style="font-weight: 400;">However, customers do pay some fees if they miss a payment, with Afterpay collecting a whopping $70 million in late fees in 2020.</span></p> <p><span style="font-weight: 400;">The Australian Securities and Investments Commission (ASIC) also criticised Afterpay, Zip, and other BNPL providers for charging excessive fees.</span></p> <p><span style="font-weight: 400;">In a report released last year, the regulator found that one in five BNPL users are missing payments.</span></p> <p><span style="font-weight: 400;">It also found that 15 percent of users had taken out additional loans to pay for the services.</span></p> <p><span style="font-weight: 400;">As for Afterpay’s place in pubs, chief spokesperson for CANSTAR Steve Mickenbacker said it could be especially challenging to navigate.</span></p> <p><span style="font-weight: 400;">“You visit a pub, perhaps budgeting to buy two drinks … BNPL puts you in a position to turn those two drinks into eight,” he said.</span></p> <p><span style="font-weight: 400;">“Without self-discipline, that two-beer pub trip could become a six-week hangover.”</span></p> <p><em><span style="font-weight: 400;">Images: Getty Images</span></em></p>

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