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Are Buy Now Pay later schemes changing our attitudes to debt?

25 minutes


Steven Threadgold

Associate Professor
University of Newcastle

Jonathan Shapiro

Senior Journalist
Australian Financial Review

Episode Notes

If you have a few ‘buy now pay later’ purchases on the go, is that debt? And if it is, do you think of it as good debt or bad debt? With the introduction of options like Afterpay and its many competitors, has debt become a game that's easy to begin but nearly impossible to end, especially for Australia’s young people?

Ginger Gorman 00:01

How much debt do you reckon the average 18-year-old has?

Rose 00:06

Everyone wants the new shoes, everyone wants the coolest makeup and stuff. You’re in school – it’s not like you’ve got cash flow coming in all the time. Like, it’s easier just to click and get what you want, you know, you can show it off and that sort of thing.

Ginger Gorman: Rose is talking about Afterpay, the app that lets you make a purchase and pay it off in four instalments. Rose isn’t her real name by the way.


When I first did it, like, I like didn’t think it was going to be as bad as it was. Like it – I didn’t,  it never got that bad. But I was like, now I’ll be around, I’ll just buy a little shoe here and a little thing here just to help to get between, you know, my paycheck because I’m working minimum wage as a waitress.

Ginger Gorman  00:48

So she’s 18. She has access to an app on her phone that’s kind of like a credit card, but technically not a credit card. What could possibly go wrong?

Rose  00:58

Well one thing – COVID happened, and then I stopped having a job. So you know, I never took into account what could always happen, like you never know, I didn’t really prepare for that either. And I know a lot of people didn’t. And it could be not even COVID. It could be anything like you know, you just lose your job or, you know, anything.

Ginger Gorman  01:15

So let’s go back to that. You started using Afterpay, what kind of stuff were you buying on after pay?

Rose  01:21

Like I said, maybe like a dress for the weekend out or something like that originally. And then I think it went up to maybe like, I think I put an Apple Watch on Afterpay originally, like way at the start, and I was paying that off. But that was probably the biggest expense that I did.

Ginger Gorman  01:37

Rose racked up a $1,500 debt, which doesn’t sound like much. But let’s remember that when this happened, she was still in high school. Did she really grasp what she was getting into? Did she even think of it as a debt

Rose  01:53

There was that little voice in the back of my head that was like, well, like, do you need that sort of thing as well. And this isn’t your money straightaway. Yeah, like it was in the back of my head. But I kind of just weighted it up and I was like, oh, it’s only a little bit of money. Like it’ll be alright, I’ll be able to cover up the cost if I need to sort of thing. But everyone else was doing sort of thing. Like, like we said a bit of pressure around – like peer pressure sort of thing. Not pressure, no-one told me to do it.

Ginger Gorman  02:19

But you felt like you wanted to have similar items that were fashion items or other things that your friends had.

Rose  02:25

Yeah, or even things just to help me out. Like if I needed, like something for a sport like had no money, I need a new pair of football boots and like they’re like $200, or a new pair of joggers or something like that, I’d always do that as well. Like just, it’s from that stage where you’re not with mom and dad paying everything anymore. And I’m not working a full time job with big income. It’s just kind of, I want a couple things that I want. And this is how I could get it.

Ginger Gorman  02:48

And what happened how much debt did you end up in?

Rose  02:51

I think maybe a total of a grant and a half. But they cut me off like at a certain point said start paying it back. But like I said COVID happened and I didn’t have a job and like I kept lapsing on payments. So now like I can’t completely get an account back.

Ginger Gorman:

So you have no account now.


No, I can’t go like there’s an account there. And I can go on because it’s like I don’t know have to keep it there for history or something. But it can’t be used.

Ginger Gorman  03:18

It’s frozen.


Yeah, that’s right.

Ginger Gorman:

And how did you feel when they froze it?

Rose  03:24

Oh, I don’t know. I ended up getting zip anyway. But I learned a lot from it. And I was like – alright, don’t fall into the same trap you did last time. I might use it for an emergency thing. But now it’s not shoes and dresses like it was before. It’s now like, my partner needed a laptop. So we had to go and put a laptop on Zip sort of thing different. Yeah, for like her education.

Ginger Gorman  03:47

So what’s going through your mind right now? Did rose bring it on herself? Is she foolish to have been blocked from after pay only to open an account with its competitor? Zip pay? Or is this simply generational? If I think back, my first experience with debt was laybuy. Remember that? You take your much desired purchase to the back desk in a department store where they take your details and a bit of cash, then put the item on a shelf only to be handed over once it’s fully paid off.

Later, I got a loan to buy a car. And I remember going into the bank with my deposit and a bunch of pay slips. And my dad had to be a guarantor to buy my little red Corolla for $8,000. But if you’re the same age as the Apple iPhone, and you grew up with a lot of digital milestones, it makes sense that your first experience with debt would be as easy as downloading an app.

Jonathan Shapiro  04:50

Afterpay is a bit of a revolution. Simply put, it’s a digital user-friendly way to pay for stuff and the elegance of Afterpay that instead of paying for something upfront, like a pair of jeans for $100, you can break up the price into four equal instalments over six weeks, so $25 every two weeks, and you also don’t have to pay any interest, so it’s completely free for you.

Ginger Gorman  05:15

That’s Jonathan Shapiro. He’s a senior reporter at the Australian Financial Review. He’s also the co-author, along with James Ayers, of a book called Buy now pay later? The extraordinary story of Afterpay. This is Seriously Social. I’m Ginger Gorman. And in the pod today, what is debt to today’s youth? Is there good debt and bad debt. And with the introduction of apps like Afterpay, and its many competitors, has debt become a game that’s easy to begin, and nearly impossible to end? We’ll come back to Afterpay in just a moment. But first, Steve Threadgold, a sociologist at the University of Newcastle has been looking at the generational divide when it comes to debt.

Associate Professor Steven Threadgold  06:20

Okay, so the main reason that we, in youth studies, try and do research collaboratively with young people is that for the most part, young people are talked at and about, and to, but rarely talked with.

They, there’s a whole bunch of kind of political and media, talk about young people in their lives and their responsibilities – and more often than not their failings. But really young people don’t get an opportunity to speak too much themselves.

So youth studies kind of starts with a concern to kind of represent the lives of young people realistically rather than in the ways that they’re stereotyped and scapegoated in public discourse.

So, you know, in terms of those kind of moral panics about you know, youth cultures, they’re always like, you know, Marilyn Manson is gonna make your kids kill people, and, you know – more economic stuff, you know: the classic one is young people eat too many avocados so they can’t buy a house.

It’s all those kinds of all those kinds of misnomers that actually seem to blame the actions of young people for wide social problems that they actually have very little individual control over.

Most of the things like, talking about young people can’t buy houses, because they had too many avocados and toast is absurd when the prices of houses are going up $1,000 a day in Sydney at the moment. If you had one less $22 avocado plate a week, it would take you something like 19 years to save the deposit rather than 21. You know, that’s not quite accurate – it’s probably 16 or 19, or something, but like, it’s just an absurd way of thinking about it.

So we want to give young people a voice and so we try and include, you know, we talk with them more than “at them” or “about them” as much as we can.

Ginger Gorman  08:11

It sounds like what you’re saying, Steve, is that by not talking with young people, by talking at them, it’s effectively a stigmatising discussion.

Associate Professor Steven Threadgold  08:25

Yeah, absolutely. I mean, when I hear, you know, often boom of an increasingly Genex-aged people in the media, in politics or whatever talk about young people, sometimes I wonder if they’ve ever met one.

Other than their own kind of immediate family, which is, you know, often very indicative of the biases that they have.

So the stereotyping and complete, almost willful misrepresentation and misunderstanding of what young people face as they are going through adolescence, but more so on from a sociological level, you know, having to kind of deal with education systems, and then labor markets that are increasingly precarious, and have changed in all kinds of ways that it’s actually very hard for them to set themselves up financially, unless you’re already kind of coming from relative privilege.

Young people are constantly blamed for making the wrong choices, or not making choices that actually don’t exist. Right?

So a lot of the things that like, the expectations of young people today, that they kind of leave school, get a secure job and, you know, earn 100 grand a year and be able to buy a house and then get married and have kids by the late 20s. It’s just completely unrealistic. It’s actually the kind of normal state of previous generations adulthoods that today really look like privilege.

Ginger Gorman  09:41

Steve has recently completed research on young people between the ages of 18 to 30, who have incurred various forms of debt. But it’s actually a topic that comes with a lot of baggage and that has presented Steve and his team with some challenges.

Associate Professor Steven Threadgold  09:59

What we’ve hoped to do in this project is talk to people from relatively lower income backgrounds that had had some kind of experience with problem debt. What we found, though, in terms of recruiting people that it was actually really difficult to do that. And there’s a few reasons for that, I would say, firstly, I think whenever we start talking about debt, we start talking about morals. And there’s a lot of shame and guilt about being in debt.

Ginger Gorman  10:27

So what did they find when it comes to young people and debt? Well, for one thing, they noticed that debt for young people is perceived as ubiquitous.

Associate Professor Steven Threadgold  10:36

There’s an expectation essentially, as young people move from high school to higher education, where they move from living at home with mom or dad, and now you know, getting a place in the real world, getting their own modes of transport, being able to travel, all these kinds of things mean that debt is basically just a common sense thing that you have to engage with and you have to be in.

What we do find, though, is that our respondents had different categorisations of debt. Very quickly, we could see that different kinds of debt was seen as good and bad debts.

Good debts are kind of future oriented debts, as a way of kind of improving yourself or moving towards a goal or something like that. So something like a hecs debt is seen as a good debt, because it’s seen as an investment in yourself to be able to kind of get the career and that kind of thing.

Something like a mortgage, it’s a kind of almost aspirational debt “I’d like to have a mortgage one day”, kind of means that you have to kind of get all that job stuff and that sorted out as well. So those kinds of things, kind of seen as good debts, because they’re future-oriented in terms of making a better self.

When it comes to kind of more bad debts, it’s definitely the more short-term consumer oriented things that our young people talked about. And this was particularly around things like Afterpay, you know, buy now pay later services. There was a definitely a moralism really came out when talking about these kind of short-term, more consumer oriented debts.

Ginger Gorman  12:01

Here’s Jonathan Shapiro, again.

Jonathan Shapiro  12:04

It just popped up out of nowhere. And if you were shopping on a website, and you saw the Afterpay button, you could use it there and then. You know, a few little things that you needed to put in a few details about yourself. And, you know, you didn’t break stride on your way to the checkout. And not only that, to use the example of $100, you only had to pay $25. So it’s only $25 leaving your account and you weren’t paying any interest. So the speed and ease of use, the fact that you don’t have to pay for the goods upfront and the user experience of it all, all just made it very easy to use them and fostered that mass take up.

Ginger Gorman  12:42

In some of your reporting. Jonathan, you’ve described the attractiveness of Afterpay as shedding guilt. What did you mean by that?

Jonathan Shapiro  12:52

We and others have tried to understand the morality of Afterpay. And I think a lot of finance people looked at it very simplistically and logically and said, “This is allowing a college girl that didn’t have $100, that wanted something, that pair of jeans for $100 to buy it and Afterpay gave them the money they didn’t have.” But I think that only probably accounts for some of the attraction of off Afterpay. I think beyond that, it was that breaking up the payment into those four equal payments, that made you less guilty and helped you overcome a barrier that otherwise might have prevented you from buying something, or encouraged you to borrow more.

Ginger Gorman  13:31

And it doesn’t have the same feeling it seems to me as a credit card, well, you know that you’re going to get lumbered with a debt. It doesn’t feel like that in the same way.

Jonathan Shapiro  13:41

The comparison to credit cards is very, very interesting and nuanced. So I mean, a lot again, the logical finance people that were looking at Afterpay as a company and its product they were they were saying why would you use Afterpay? You can just use a credit card – so long as you pay your credit card off, on time, you know, you’ve got your time to pay credit card, there really is no benefit, the credit cards are doing the same thing.  It’s giving you the full payment: it’s funding your purchase.

But I think I think this is where I’d probably give some Afterpay users credit, sorry to use a pun. With a credit card, I think they’ve seen their parents and their friends and then maybe their older cousins get caught up in credit card debt. And there’s absolutely no doubt that credit cards, there is a trap element to credit cards. If you fall behind on your payments, you just have to make a small payment to satisfy the credit card company or to satisfy the bank that issued the credit card, but you can get into this trap and that debt can build up and you do get charged interest, and it can become a real burden.

Afterpay will cut you off if you keep missing your payments. Whereas there’s absolutely no doubt that credit cards they win when you get stuck in a debt trap. Whereas Afterpay, they just need you to keep transacting – they want good customers to continuously transact and make the payments.

Ginger Gorman  15:03

Steve Threadgold said that the participants in his study were confused as to whether or not the money they owed on Afterpay and other pay later apps was really a form of debt.

Associate Professor Steven Threadgold  15:16

Many of our respondents felt like, you know, they’re using their own money in a way so it’s not a debt. But of course, if you don’t make a repayment, you get like a fine like a fee. They talk about how this feels a lot different than actually going into debt and having to repay a credit card loan.

So we have some really, what I think is really fascinating distinctions being made between the feeling of being in debt between these different platforms.

And this is definitely manifests through their orientation towards like, the digital realm and the kind of the institutional bank, you know, bank manager going into a place and dealing with people.

Ginger Gorman  15:53

Is it that they see a debt that you would get from a bank as a “real debt” in inverted commas, but they don’t see a debt that you click on, which is Afterpay as a “inverted commas” real debt?

Associate Professor Steven Threadgold  16:04

Yeah, with our respondents, there was definitely different orientations towards that. But yeah, it feels differently in the sense that it’s just easier to access for a start. Like, I remember, when I had to get my first car loan, I wore a suit to the bank in the 90s, right, I had to go with my dad came in, like, you know, and all this kind of thing. So that kind of thing has gone. But access to this now completely happens, you know, online, it removes the kind of dealing with actual people, which then also removes the kind of possibilities of guilt and shame happening in their personal basis.

Ginger Gorman  16:36

There are lots of reasons why not having to go into a bank to access a loan is good for young people. For one thing, what if you don’t own a decent suit? What if you don’t have a supportive parent to stand by your side. But one of the fallouts of moneylending going digital is a sort of gamification of debt.

Associate Professor Steven Threadgold  16:58

We’ve started to kind of analyse the apps themselves, and, and certainly our respondents talk about the experience of using these apps as having those aspects. So the idea of gamification is the kind of introduction of, you know, game like things into things that aren’t games, right. So you know, and in terms of the realm of consumption of, you know, things like Facebook, and things like online shopping, and certainly things like these apps. They encourage us to kind of engage with them, not necessarily as a debt service, but more in that kind of more relaxed manner, I suppose.

So the gamification in that sense, in terms of something like the Buy Now pay later apps, they talk about how, if you pay off the loan on time, or you make a payment on time, you get a little kind of ‘ding” and a reward. And if you do it a few times in a row, what it means the next time is that you know, you get an extra week to make the first payment. So there’s kind of these “rewards” in inverted commas, but they’re not monetary rewards. And if in the future you kind of miss a payment, you still get punished. But these kinds of things, encourage a way of engaging with this debt in a more, you know, gamified way.

There’s a classic example, I think, where one of our respondents was trying to access a payday loan, and it was all done online. And you just put the information in.

And she talked about how the way that the loan was progressing and she could see it happening on like a screen in the app, felt like she was ordering a pizza, like, you know, you can watch the pizza coming from the place now at all the way to your house.

This kind of mechanism was built into the app for her to kind of view how the loan was progressing, when it was going to turn up when she could get access. So it creates these kind of everyday feelings of comfort in a way.

Because these things correspond to many of the other things we use in our day-to-day lives. They don’t feel necessarily like that kind of nervous having to go and meet a person to ask for money. They allow us to kind of access this stuff, just like we would to buy a pizza or you know, order a pair of Asics from Rebel Sport or something.

Ginger Gorman  19:09

Jonathan Shapiro agrees that there is an element of gamification, when it comes to apps like Afterpay,

Jonathan Shapiro  19:16

Others might use a different word. I mean, some might call it UX or user experience, you know, they’ve really made it seamless, easy, fun to use, I guess that’s a version of gamification.

And, and they and other technology companies spend a lot of time and effort perfecting the user experience, you know. Making it easy, friendly, fun to use, you know . Whether what you’re doing is the right thing is a separate debate, but they are very intensely focus on making their product, easy to use and encouraging you to use it as much as possible. So I think we’ve seen with Afterpay and I think we are we have seen it overseas and starting to see it here beyond credit and debt.

So we’re seeing it with like online share trading. You know, people are making it very easy. You’re on a bus trip, you can log on to your phone, set up a trading account and buy shares of CBA or Afterpay even. And so, so it’s interesting now that gamification is coming to financial services. And I think something that regulators, lawmakers, politicians, everyone needs to stop and think about this lack of friction. There’s always been a natural friction in buying shares or getting a credit card that slows you down and makes you consider things; but that friction has been reduced to nothing. The issue is, it’s very hard to tell an entrepreneur or you know, someone at CBA or anywhere that’s trying to perfect their product, to make it clunkier, slower and less-user friendly.

So I don’t know where we land on this.

But there is a point and I think we’re reaching it or have crossed it, where a lack of friction natural friction is maybe changing the behavior of users, potentially to their detriment.

I mean, how we deal with that, I don’t know.

Ginger Gorman  21:04

The logical answer, it would seem is better regulation.

Jonathan Shapiro  21:09

There was a lot of fear that Afterpay would get kind of kneecapped by regulation, that ASIC and government would say “Look, this is lending, this is credit, you need to now do credit checks”, which would have really stopped them in their tracks and slow their growth. But they somehow got away with it. The users were very positive of it, you know. The merchants were the ones paying for it, but the users loved it. So it was very hard for anyone – a regulator or a politician – to spoil the party.

Whether it’s good or bad for society? I don’t know. I mean, I gave the example of credit cards, credit cards, I think, are not great products at all. I think they do get a lot of people into trouble that could easily have been avoided, just through neglecting to pay something or there’s lots of ways a credit card can trap you and harm you. So as an alternative to credit cards, I would say, it’s hard to be too critical of Afterpay.

Ginger Gorman  22:02

Let’s circle back to Steve’s finding about young people’s attitudes of good debt and bad debt. Where did those attitudes come from?

Associate Professor Steven Threadgold  22:11

There’s a catch 22 that’s going on here in a way. So just on that kind of moralization of debt, you know. We had very different attitudes, you know, some people were very wary of using Buy now pay later or refused to, they saw it as a risk. Others kind of were using it, but they were also very well aware of the risks. They weren’t just kind of using these things blindly.

I just really want to point that out, because it’s really easy to paint your paint young people as a cultural dupe or, or being irresponsible here. But really, these things are working exactly how they’re intended to. Right? In terms of that, you know, internal, external relations of kind of pressure and what to do about these things.

I mean, in a world where young people find it almost impossible to find a good paying job unless you do like, you know, 10 years of study or whatever, you know. Real wages have stagnated, the labor market has been thoroughly made precarious, and there’s underemployment and casualisation and all this kind of stuff. Most young people don’t have a whole bunch of money just to be spending on day-to-day life and having fun.

But like, if you look everywhere else, or in terms of our advertising and all this kind of stuff, you know, that’s what life is right? A good life is being a good consumer and having fun through those products and experiences.

So to be able to kind of do that stuff, you know, it’s inevitable that these kinds of things are going to be used. I think what’s happening here is exactly how this industry is set up and our banking industry, and our Buy Now pay later industry and all the lack of regulation around it. It’s working exactly how everyone wants it to right? People are consuming, they’re going into debt. And once you’re in debt, you’re kind of trapped in that kind of system of having to chase more work to pay it back off. It’s kind of a perfect working subject in a way.

Ginger Gorman  24:05

Thanks for listening to Seriously Social. I’m Ginger Gorman.

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Seriously Social is produced by Kim Lester, engineered by Mark Gargeldonk, aka Baldy and executive produced by Sue White and Bonnie Johnson. It’s an initiative of the Academy of the Social Sciences in Australia. Next time, what gives you hope? It’s easy to feel despondent when times are tough, but what makes you feel hope? See you next time.

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