1 00:00:05,960 --> 00:00:08,680 Speaker 1: Welcome to the Fear and Greed business Interview. I'm Suan Alma. 2 00:00:08,840 --> 00:00:11,640 Speaker 1: Buy Now, Pay Later in Australia has moved into a 3 00:00:11,680 --> 00:00:15,600 Speaker 1: new era, with the sector's products now regulated by credit laws. 4 00:00:15,640 --> 00:00:18,320 Speaker 1: It means customers signing up for products like after pay 5 00:00:18,360 --> 00:00:21,000 Speaker 1: and Zip will now have to answer questions about their 6 00:00:21,040 --> 00:00:24,120 Speaker 1: finances and have their credit history checked before they can 7 00:00:24,200 --> 00:00:26,360 Speaker 1: use by Now, Pay Later. I wanted to find out 8 00:00:26,360 --> 00:00:29,240 Speaker 1: more about how these changes are affecting their companies involved, 9 00:00:29,240 --> 00:00:32,159 Speaker 1: but also the customers and merchants who use the products. 10 00:00:32,479 --> 00:00:36,880 Speaker 1: Michael Sadat is the international head of Public Policy at Block, 11 00:00:36,920 --> 00:00:39,120 Speaker 1: the owner of After Paying. Michael, Welcome to Fear and Greed. 12 00:00:39,320 --> 00:00:40,839 Speaker 2: Thank you Sean for having me so. 13 00:00:41,000 --> 00:00:44,519 Speaker 1: Regulation has been on the cards for many years for 14 00:00:44,600 --> 00:00:47,360 Speaker 1: the sector. What exactly has changed this week? 15 00:00:47,920 --> 00:00:51,559 Speaker 3: So as of Tuesday this week, the buy now, Pay 16 00:00:51,600 --> 00:00:55,440 Speaker 3: Later industry is now subject to a form of regulation 17 00:00:55,680 --> 00:00:58,480 Speaker 3: under the National Consumer Credit Protection Act. And I say 18 00:00:58,480 --> 00:01:02,640 Speaker 3: a form of regulation because the government decided that in 19 00:01:02,680 --> 00:01:06,080 Speaker 3: bringing by Now, Pay Later within this piece of legislation 20 00:01:06,120 --> 00:01:09,759 Speaker 3: that regulates all consumer credit in Australia, that a tailored 21 00:01:09,800 --> 00:01:12,160 Speaker 3: form of regulation was appropriate. 22 00:01:12,640 --> 00:01:14,520 Speaker 2: So there's a new category. 23 00:01:14,319 --> 00:01:18,000 Speaker 3: Of credit contract called low cost credit contract or l 24 00:01:18,040 --> 00:01:23,160 Speaker 3: triple C another acronym for everybody to learn, and ultriple 25 00:01:23,160 --> 00:01:27,080 Speaker 3: cs are regulated slightly differently to credit cards. And that's 26 00:01:27,080 --> 00:01:31,919 Speaker 3: because in deciding what policy settings should be put in place, 27 00:01:32,560 --> 00:01:35,120 Speaker 3: the government acknowledged that by our pay, latter products like 28 00:01:35,120 --> 00:01:39,160 Speaker 3: after pay tend to be lower risk, lower cost, the 29 00:01:39,160 --> 00:01:42,160 Speaker 3: fact that they never charge interest, the consumer harms are 30 00:01:42,200 --> 00:01:45,280 Speaker 3: just different to what we see with credit cards, and 31 00:01:45,319 --> 00:01:48,240 Speaker 3: therefore a tailored form of regulation was appropriate. 32 00:01:48,480 --> 00:01:51,200 Speaker 1: Okay, so where they landed is it about right? Do 33 00:01:51,240 --> 00:01:51,639 Speaker 1: you think? 34 00:01:52,160 --> 00:01:54,040 Speaker 2: Yeah? We do think it's about right. 35 00:01:54,120 --> 00:01:57,520 Speaker 3: I think, you know, there's always questions of detail that 36 00:01:57,600 --> 00:02:00,600 Speaker 3: you might quibble with, but yes, fundamentally we think they 37 00:02:00,840 --> 00:02:05,320 Speaker 3: got the balance right. The process started a few years 38 00:02:05,320 --> 00:02:08,200 Speaker 3: ago when they looked at sort of the different options 39 00:02:08,760 --> 00:02:11,440 Speaker 3: and they ranged from a very light touch approach to 40 00:02:12,080 --> 00:02:15,720 Speaker 3: an approach that would see after pay and other products 41 00:02:15,720 --> 00:02:17,720 Speaker 3: regulated exactly the same as a credit card. And we 42 00:02:17,720 --> 00:02:20,040 Speaker 3: were we were making the case that that was not appropriate, 43 00:02:20,080 --> 00:02:22,920 Speaker 3: and fortunately the government accepted that and we ended up 44 00:02:22,960 --> 00:02:25,880 Speaker 3: in a sort of middle ground option for consumers. 45 00:02:26,200 --> 00:02:28,480 Speaker 1: So let's take the ones who are about to get 46 00:02:29,320 --> 00:02:33,000 Speaker 1: an after pay product as of today, So they've never 47 00:02:33,040 --> 00:02:36,640 Speaker 1: had enough to pay product. What a difference is it 48 00:02:37,120 --> 00:02:39,120 Speaker 1: to a week ago? What do I need to do 49 00:02:39,440 --> 00:02:40,639 Speaker 1: if I want to use after pay? 50 00:02:41,400 --> 00:02:44,840 Speaker 3: Yeah, So the change for new customers applying today is 51 00:02:44,880 --> 00:02:46,880 Speaker 3: that you will be asked to answer a couple of 52 00:02:46,919 --> 00:02:50,120 Speaker 3: questions about your financial situation. You'll be asked to tell 53 00:02:50,200 --> 00:02:53,120 Speaker 3: us your income and your expenses, and whether you've got 54 00:02:53,160 --> 00:02:56,640 Speaker 3: certain types of credit products. And you'll also be asked 55 00:02:56,639 --> 00:02:59,280 Speaker 3: to agree for us to perform a credit check on you. 56 00:03:00,040 --> 00:03:04,399 Speaker 3: So they're the main differences that apply today for those 57 00:03:04,440 --> 00:03:08,160 Speaker 3: new customers. And assuming the answers to those questions are 58 00:03:08,160 --> 00:03:12,840 Speaker 3: satisfactory and the credit check is satisfactory, you'll be assigned 59 00:03:13,040 --> 00:03:16,320 Speaker 3: a spending limit, an initial spending limit by after Pay, 60 00:03:16,720 --> 00:03:18,800 Speaker 3: which will enable you to then use the product. 61 00:03:19,280 --> 00:03:21,200 Speaker 1: What about people who have been with after pay for 62 00:03:21,240 --> 00:03:25,440 Speaker 1: a while when they use their after pay product this week? 63 00:03:25,480 --> 00:03:26,600 Speaker 1: Does it make any difference? 64 00:03:26,880 --> 00:03:30,080 Speaker 3: So for existing customers there's not really a change, at 65 00:03:30,200 --> 00:03:35,480 Speaker 3: least initially. So anyone with an account prior to regulation 66 00:03:35,560 --> 00:03:38,800 Speaker 3: commencing will have had a spending limit assigned to them, 67 00:03:38,920 --> 00:03:41,840 Speaker 3: and those spending limits can range up to up to 68 00:03:41,880 --> 00:03:44,640 Speaker 3: four thousand dollars actually, and so you can keep that 69 00:03:44,680 --> 00:03:47,720 Speaker 3: spending limit and keep using it without having to go 70 00:03:47,760 --> 00:03:52,360 Speaker 3: through the process I just described. That applies to new customers. If, however, 71 00:03:52,440 --> 00:03:56,160 Speaker 3: you would like a higher spending limit, then the new 72 00:03:56,200 --> 00:04:00,080 Speaker 3: regulatory framework does apply, and you will be asked to 73 00:04:00,200 --> 00:04:02,120 Speaker 3: answer a couple of questions and you'll be asked to 74 00:04:02,160 --> 00:04:03,720 Speaker 3: also to agree to a credit check. 75 00:04:04,200 --> 00:04:07,880 Speaker 1: Okay, So that's for new users, existing users, What about 76 00:04:07,960 --> 00:04:11,320 Speaker 1: have to pay? Does it make your job much more difficult? 77 00:04:11,760 --> 00:04:12,480 Speaker 2: We don't know. 78 00:04:12,600 --> 00:04:16,120 Speaker 3: We don't see that it makes our job significantly more difficult. 79 00:04:16,279 --> 00:04:18,360 Speaker 2: There was obviously some work involved. 80 00:04:17,960 --> 00:04:21,200 Speaker 3: In preparing for the regulatory changes that have become effective 81 00:04:21,240 --> 00:04:26,320 Speaker 3: this week, building the credit check process and changing the 82 00:04:26,440 --> 00:04:30,960 Speaker 3: customer onboarding flow for new customers and existing customers who 83 00:04:31,000 --> 00:04:33,280 Speaker 3: are applying for a higher spending limit. You know, there 84 00:04:33,320 --> 00:04:35,760 Speaker 3: are some changes, you know, at the back end as 85 00:04:35,760 --> 00:04:40,120 Speaker 3: well that are required. But generally speaking, the fact that 86 00:04:40,160 --> 00:04:44,240 Speaker 3: we've we've now got a tailored form of regulation is 87 00:04:44,279 --> 00:04:47,359 Speaker 3: the most important thing, and it's a form of regulation 88 00:04:47,400 --> 00:04:50,359 Speaker 3: that we've been operating under in New Zealand since September 89 00:04:50,440 --> 00:04:52,599 Speaker 3: last year. The New Zealand government did a very similar 90 00:04:52,640 --> 00:04:55,960 Speaker 3: thing and came out with a specific form of regulation 91 00:04:56,040 --> 00:04:58,960 Speaker 3: for by now pay later, and that's been working well. 92 00:04:59,000 --> 00:05:01,719 Speaker 3: And although Australia not exactly the same as New Zealand 93 00:05:01,720 --> 00:05:05,000 Speaker 3: there are some nuances, it's broadly the same and we 94 00:05:05,400 --> 00:05:08,360 Speaker 3: believe it it will be great for the industry moving forward. 95 00:05:08,720 --> 00:05:16,040 Speaker 1: Stay with me. Michael will be back in a minute. 96 00:05:17,360 --> 00:05:20,640 Speaker 1: My guess this morning is Michael Sadat, International Head of 97 00:05:20,760 --> 00:05:24,159 Speaker 1: Public Policy at BLOCK. Before the break, Michael, we talked 98 00:05:24,279 --> 00:05:27,919 Speaker 1: about the users existing and new. We talked about art 99 00:05:27,960 --> 00:05:30,080 Speaker 1: to pay. Of course, the group we haven't spoken about 100 00:05:30,120 --> 00:05:33,760 Speaker 1: is merchants. So do these changes make much difference to merchants? 101 00:05:34,200 --> 00:05:38,919 Speaker 3: So the changes themselves don't apply to merchants. Things continue 102 00:05:39,080 --> 00:05:42,120 Speaker 3: much the same as they have been so far, I 103 00:05:42,160 --> 00:05:46,640 Speaker 3: think for merchants though, and you know, the community more generally, 104 00:05:46,720 --> 00:05:50,880 Speaker 3: the fact that BALPA that is regulated does provide a 105 00:05:50,920 --> 00:05:53,800 Speaker 3: degree of confidence in the product and in the market. 106 00:05:54,400 --> 00:05:57,960 Speaker 3: You know, regulation does play an important role in financial services, 107 00:05:58,160 --> 00:06:01,839 Speaker 3: and in this case, we think having the sort of 108 00:06:01,880 --> 00:06:06,760 Speaker 3: debate around regulating the industry resolved and a decision made 109 00:06:06,760 --> 00:06:10,320 Speaker 3: that's actually been implemented is a really important masterone for 110 00:06:10,360 --> 00:06:13,120 Speaker 3: the industry as a whole. And I think for merchants 111 00:06:13,240 --> 00:06:16,800 Speaker 3: who might have hesitated or thought twice about whether to 112 00:06:17,680 --> 00:06:21,159 Speaker 3: allow payment methods like after pay to be used, I 113 00:06:21,200 --> 00:06:25,280 Speaker 3: think this now does resolve that long standing issue. So 114 00:06:25,520 --> 00:06:27,440 Speaker 3: from that perspective, I think merchants can have a lot 115 00:06:27,440 --> 00:06:31,479 Speaker 3: of confidence moving forward. But otherwise there's no direct impact 116 00:06:31,480 --> 00:06:34,720 Speaker 3: on merchants. All of the regulatory obligations sit with after pay. 117 00:06:35,279 --> 00:06:37,520 Speaker 1: Well, one thing, I remember talking to an advisor to 118 00:06:37,600 --> 00:06:39,960 Speaker 1: one of the big buy now, pay later groups and 119 00:06:40,080 --> 00:06:42,800 Speaker 1: he said, there's a whole generation of people now, from 120 00:06:42,880 --> 00:06:47,200 Speaker 1: millennials to younger who are used to this form of payment, 121 00:06:47,640 --> 00:06:49,799 Speaker 1: and I thought was really interesting because my age group 122 00:06:50,480 --> 00:06:53,080 Speaker 1: was new. But he said, by now pay later has 123 00:06:53,080 --> 00:06:56,800 Speaker 1: a long lifespan simply because it's just how people make 124 00:06:56,839 --> 00:07:00,360 Speaker 1: payments nowadays. Do you think what we're seeing in terms 125 00:07:00,360 --> 00:07:02,400 Speaker 1: of the regulation will make any difference today. 126 00:07:03,279 --> 00:07:06,400 Speaker 3: No, And in fact I think it will support and 127 00:07:06,960 --> 00:07:10,120 Speaker 3: bolster the industry because consumers can also have confidence in 128 00:07:10,160 --> 00:07:12,880 Speaker 3: the fact that the product they're using is regulated. It's 129 00:07:12,920 --> 00:07:14,880 Speaker 3: an interesting point you make, actually, because I think it 130 00:07:15,000 --> 00:07:17,000 Speaker 3: used to be very much a right of package for 131 00:07:17,080 --> 00:07:20,520 Speaker 3: people entering adulthood or entering the workforce, for the first 132 00:07:20,520 --> 00:07:22,320 Speaker 3: time that you would get a credit card, like you, 133 00:07:22,880 --> 00:07:24,440 Speaker 3: you would sign up for a credit card. That was 134 00:07:24,480 --> 00:07:27,680 Speaker 3: the thing that everybody did. Exciting, Michael, very exciting back 135 00:07:27,680 --> 00:07:28,240 Speaker 3: in the day. 136 00:07:28,120 --> 00:07:31,000 Speaker 2: It was. But that is no longer the case. It 137 00:07:31,080 --> 00:07:32,400 Speaker 2: is no longer a rite of passage. 138 00:07:32,440 --> 00:07:35,680 Speaker 3: Credit Card usage is significantly down compared to where it 139 00:07:35,760 --> 00:07:40,480 Speaker 3: was several years ago. Younger consumers mostly don't have credit cards. 140 00:07:40,480 --> 00:07:42,960 Speaker 3: It's not seen as a desirable thing or a necessary 141 00:07:42,960 --> 00:07:46,000 Speaker 3: thing anymore. And you know this is now playing out 142 00:07:46,000 --> 00:07:49,080 Speaker 3: more broadly. The average consumer using after pay is now 143 00:07:49,280 --> 00:07:52,640 Speaker 3: aged about thirty eight or thirty nine, so not especially young. 144 00:07:53,080 --> 00:07:57,360 Speaker 3: These are people with kids with mortgages. And recent research 145 00:07:57,400 --> 00:08:00,840 Speaker 3: that we published this week shows that people with after 146 00:08:00,880 --> 00:08:03,040 Speaker 3: pay have very similars credit scores to people who are 147 00:08:03,080 --> 00:08:08,560 Speaker 3: using credit cards. So it's a very mainstream user in demographic. 148 00:08:08,640 --> 00:08:12,320 Speaker 1: Now, what do people spend it on? If that's your demographic, 149 00:08:12,720 --> 00:08:14,760 Speaker 1: what do they spend it on? What do they use 150 00:08:14,800 --> 00:08:16,240 Speaker 1: it for? Sorry? What are they used for? 151 00:08:16,680 --> 00:08:19,760 Speaker 3: I think they're using it for virtually anything these days. 152 00:08:19,800 --> 00:08:22,720 Speaker 3: It used to be that after pay was very popular 153 00:08:22,760 --> 00:08:26,120 Speaker 3: with fashion and beauty and footwear and homewares, and it 154 00:08:26,200 --> 00:08:29,400 Speaker 3: still is, like that's still very much the main way 155 00:08:29,440 --> 00:08:31,880 Speaker 3: that people use after pay for those kinds of purchases, 156 00:08:32,160 --> 00:08:35,120 Speaker 3: but increasingly people are using it for their everyday spend. 157 00:08:35,400 --> 00:08:38,439 Speaker 3: You know, they see it as a payment method that's convenient, 158 00:08:38,600 --> 00:08:42,840 Speaker 3: it helps them budget, and we've now enabled consumers to 159 00:08:42,920 --> 00:08:46,280 Speaker 3: pick a preferred payment day, so instead of your payment's 160 00:08:46,280 --> 00:08:49,320 Speaker 3: coming out, you know, fourteen days after you make that 161 00:08:49,360 --> 00:08:51,360 Speaker 3: initial purchase, So if you buy something on a Monday, 162 00:08:51,400 --> 00:08:53,280 Speaker 3: it used to be that it would come out two 163 00:08:53,280 --> 00:08:57,160 Speaker 3: weeks on the Monday. You now can select your preferred 164 00:08:57,160 --> 00:08:58,800 Speaker 3: payment day. So if you buy something on a Monday, 165 00:08:58,840 --> 00:09:00,640 Speaker 3: but you prefer to actually pay us on a Thursday 166 00:09:00,640 --> 00:09:02,920 Speaker 3: because that's when you get paid, then the payments will 167 00:09:02,960 --> 00:09:05,960 Speaker 3: come out every fortnight on a Thursday, and it just 168 00:09:06,040 --> 00:09:08,720 Speaker 3: makes it a lot more convenient for people who are budgeting, 169 00:09:08,960 --> 00:09:10,120 Speaker 3: you know, they're spending. 170 00:09:10,400 --> 00:09:12,840 Speaker 1: Perhaps you know, one way of judging whether or not 171 00:09:12,920 --> 00:09:16,920 Speaker 1: it's working is your arrears or people who aren't paying back. Essentially, 172 00:09:17,240 --> 00:09:18,920 Speaker 1: has that changed much over the years. 173 00:09:19,640 --> 00:09:23,679 Speaker 3: No, In fact, it continues to improve and it remains 174 00:09:23,760 --> 00:09:27,520 Speaker 3: under one percent our credit losses globally, so we see 175 00:09:27,559 --> 00:09:31,559 Speaker 3: a really healthy repayment rate with consumers over ninety five 176 00:09:31,559 --> 00:09:35,440 Speaker 3: percent of our customers don't pay late fees. It's a 177 00:09:35,440 --> 00:09:38,360 Speaker 3: product that I think because it's so simple and easy 178 00:09:38,400 --> 00:09:41,560 Speaker 3: to use, and also because consumers really enjoy using it. 179 00:09:41,960 --> 00:09:43,719 Speaker 3: One of the guardrails that we have is that if 180 00:09:43,760 --> 00:09:46,520 Speaker 3: you're late on a payment, you can't actually use this 181 00:09:46,600 --> 00:09:49,840 Speaker 3: again until you're up to date again. So that's an 182 00:09:49,880 --> 00:09:53,400 Speaker 3: important protection for consumers. It means that the people who 183 00:09:53,400 --> 00:09:55,920 Speaker 3: are using US and spending have already you know, they're 184 00:09:55,960 --> 00:09:58,199 Speaker 3: up to date with their payments, so they're not getting 185 00:09:58,280 --> 00:10:02,120 Speaker 3: sort of further into debt when when they potentially shouldn't be. 186 00:10:02,440 --> 00:10:04,360 Speaker 1: We're kind of out of time. MIC. But one final one, 187 00:10:04,360 --> 00:10:08,120 Speaker 1: where's Australia sit when it comes to regulation of these 188 00:10:08,160 --> 00:10:10,920 Speaker 1: sorts of products? In particular, I'm interested in the US 189 00:10:10,920 --> 00:10:13,040 Speaker 1: because after pay now being owned by a block and 190 00:10:13,360 --> 00:10:16,120 Speaker 1: rolling out in the US, where does Australia sit that. 191 00:10:16,840 --> 00:10:19,199 Speaker 3: So Australia's the second country globally to roll out fine 192 00:10:19,240 --> 00:10:21,600 Speaker 3: ou pay that regulation after New Zealand, and it looks 193 00:10:21,640 --> 00:10:24,080 Speaker 3: like the UK will be the third major market to 194 00:10:24,360 --> 00:10:26,640 Speaker 3: roll out bind our pay that regulation, and it's doing 195 00:10:26,679 --> 00:10:29,080 Speaker 3: so in a very similar fashion. So the UK government 196 00:10:29,080 --> 00:10:32,200 Speaker 3: over there has also decided to go with a sort 197 00:10:32,200 --> 00:10:35,080 Speaker 3: of tailored and bespoke approach regulating a pay that, which 198 00:10:35,080 --> 00:10:38,840 Speaker 3: is really encouraging. The US is different because the regulation 199 00:10:38,880 --> 00:10:40,800 Speaker 3: of credit in the US does happen at both the 200 00:10:40,840 --> 00:10:44,120 Speaker 3: federal and state level, and so you have essentially up 201 00:10:44,160 --> 00:10:47,960 Speaker 3: to fifty different states regulating in slightly different ways. So 202 00:10:48,000 --> 00:10:50,920 Speaker 3: After Paid does have licenses in those states in the 203 00:10:51,000 --> 00:10:55,120 Speaker 3: US where that's required, and there has been some federal 204 00:10:55,160 --> 00:10:57,679 Speaker 3: oversight in the US, but there have been some recent 205 00:10:57,720 --> 00:11:00,600 Speaker 3: changes over there with the change of administration, and so 206 00:11:00,840 --> 00:11:03,560 Speaker 3: we're sort of working through that at the moment. But yes, 207 00:11:03,600 --> 00:11:05,920 Speaker 3: it is a it's a much more complex picture over 208 00:11:05,960 --> 00:11:06,480 Speaker 3: in the US. 209 00:11:06,840 --> 00:11:08,480 Speaker 1: Michael, thank you for talking to Fear and Greed. 210 00:11:08,760 --> 00:11:09,800 Speaker 2: Thanks so much for having me. 211 00:11:10,120 --> 00:11:13,520 Speaker 1: That was Michael Sedat, International Head of public Policy at 212 00:11:13,559 --> 00:11:16,320 Speaker 1: Block including after Pay. This is the Fear and Greed 213 00:11:16,320 --> 00:11:19,120 Speaker 1: Business Interview. Join us every morning for the full episode 214 00:11:19,200 --> 00:11:21,840 Speaker 1: of Fear and Greed Business News. You can use some 215 00:11:21,880 --> 00:11:23,760 Speaker 1: I'm Sean elmont Enjoy your day.