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Speaker 1: Already and this is the Daily OFF.

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Speaker 2: This is the Daily OS.

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Speaker 3: Oh now it makes sense. Good morning and welcome to

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Speaker 3: the Daily OS. It is Thursday, the sixth of June.

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Speaker 1: I'm Billy, I'm Sam.

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Speaker 3: Over seven million Australians used by now Pay Later accounts

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Speaker 3: like after Pay or ZIP and young people are the

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Speaker 3: main adopters of this new form of credit. But now

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Speaker 3: the government is keen to apply the same rules that

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Speaker 3: govern our credit cards or loans to these services in

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Speaker 3: one of the biggest changes to the Credit Act in years.

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Speaker 3: The government hopes the new laws will protect vulnerable people

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Speaker 3: from accumulating debt by making everyone get a credit check

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Speaker 3: to use the apps. And on today's podcast, we're going

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Speaker 3: to take a look at what's being proposed, why and

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Speaker 3: what the companies themselves think of the move. But first Sam,

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Speaker 3: what is making headlines.

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Speaker 1: Australia's economy grew by zero point one percent over the

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Speaker 1: past three months. That's according to the latest figures from

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Speaker 1: the Australian Bureau of Statistics. This is measured using a

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Speaker 1: metric known as gross domestic product or GDP, which reflects

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Speaker 1: the value of all goods and services in Australia. Reserve

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Speaker 1: Bank Governor Michelle Bullock called the growth figures quote very weak,

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Speaker 1: and Treasurer Jim Chalmers said it reflected the immense pressure

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Speaker 1: placed on households due to high inflation and interest rates.

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Speaker 1: Shadow Treasurer Angus Taylor blamed slow GDP on the government,

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Speaker 1: who he claimed, quote had no economic vision for the country.

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Speaker 3: Head of NewsCorp Australasia, Michael Miller, has proposed a new

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Speaker 3: legal framework for social media companies, requiring them to apply

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Speaker 3: for and pay for a social license, which will essentially

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Speaker 3: be permission to operate in Australia. In an address to

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Speaker 3: the National Press Club, Miller outlined the proposed laws, under

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Speaker 3: which companies would be directly liable for all the content

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Speaker 3: on their platforms, have to contribute to mental health funding,

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Speaker 3: maintain a dedicated complaints hotline in Australia, and face criminal

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Speaker 3: pennses for breaking social license rules.

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Speaker 1: Several high profile TikTok accounts have been targeted in a

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Speaker 1: cyber attack, including US news network CNN and Paris Hilton.

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Speaker 1: A TikTok spokesperson told The Associated Press that a quote

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Speaker 1: very small number of accounts were impacted by the cyber attack,

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Speaker 1: and that Hilton's account was targeted but not compromised. It

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Speaker 1: comes after the US government passed a bill to force

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Speaker 1: TikTok's Chinese parent company Byteedance to sell it to a

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Speaker 1: US buyer or face being shut down over concerns. User

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Speaker 1: data is being shared with the Chinese government.

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Speaker 3: And today's good News, Bluey will feature on a limited

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Speaker 3: run of Australian one dollar coins made by their Royal

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Speaker 3: Australian Mint. Characters from the iconic children's TV show an

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Speaker 3: ABC and BBC co production will appear on three different

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Speaker 3: commemorative coins as part of the Bluey dollar Bucks series. Interestingly,

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Speaker 3: despite being the one dollar coin, the coins will cost

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Speaker 3: twenty dollars for one or fifty five dollars for all three.

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Speaker 1: Okay, So, on today's podcast, we're going to talk about

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Speaker 1: changes to the buy now, pay later sector. So think

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Speaker 1: of companies like after pay and Zip. And given the

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Speaker 1: status of how popular this service is for young people,

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Speaker 1: and given who listens to this podcast typically, I'm sure

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Speaker 1: that people listening know exactly what this is, but I

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Speaker 1: want you to give us a quick overview anyway. What

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Speaker 1: is buy now pay later?

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Speaker 3: So buy now, pay later is a financing option that

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Speaker 3: allows customers to pay for items in multiple installments rather

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Speaker 3: than upfront. So it basically means that you can pay

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Speaker 3: partly for something, but you can get that item straight away.

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Speaker 3: So let's say that there's a dress, for example, that

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Speaker 3: I want to wear this weekend, but it's way out

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Speaker 3: of my price range. So I can pay for a

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Speaker 3: quarter of it now, and then I can wear that

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Speaker 3: dress this weekend and then pay off the rest of

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Speaker 3: the dress in quarterly installments over the next four weeks following.

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Speaker 1: Yeah, and there's no interest normally. Are those payments right exactly?

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Speaker 3: And that's a key benefit to this that there is

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Speaker 3: no financial penalty for paying for it over time. It's

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Speaker 3: completely free of charge, unless you don't pay it back

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Speaker 3: in time, then there is a fee, and that can

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Speaker 3: result in a debt. But I guess when you think

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Speaker 3: about loans, you think of the interest that comes from that.

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Speaker 3: This is not like that because there's no interest there.

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Speaker 3: So it is really popular for that reason, especially amongst

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Speaker 3: young people.

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Speaker 1: It's interesting looking at these companies because you know they

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Speaker 1: make billions of dollars where that money actually comes from,

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Speaker 1: especially because they're giving customers interest free loans essentially. And

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Speaker 1: the answer to that is predominantly that they charge merchants

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Speaker 1: and merchants. So let's take your dress for an example.

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Speaker 1: The merchant could be the Iconic, and so they'll convince

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Speaker 1: the iconic to take them on as an offering to

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Speaker 1: their customers. They'll pay a fee on either the number

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Speaker 1: of transactions or maybe even a monthly installment, and the

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Speaker 1: Iconic should see their sales go up because they offer

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Speaker 1: after pay ors. Yes, and so that's the business case

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Speaker 1: they're putting forward.

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Speaker 3: Yes, So they're basically saying to their konic, you will

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Speaker 3: have more customers because it is more attractive for customers

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Speaker 3: to use after.

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Speaker 1: Pay exact there are, and you should make that money back.

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Speaker 1: So who then is the customer that's using band pl.

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Speaker 3: So according to Australia's Reserve Bank, about seven million Australians

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Speaker 3: have used buy Now, Pay later to purchase something.

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Speaker 1: It's a massive group of people, it's massive.

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Speaker 3: That's about one in three of the adult population in

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Speaker 3: Australia and about half of the employed population. So it's

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Speaker 3: a significant proportion of Australians that we're talking about here.

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Speaker 3: And in terms of who these Australians are, it's Australians

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Speaker 3: between eighteen and thirty nine, who have on average just

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Speaker 3: under one buy Now Pay Later account each, although to note,

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Speaker 3: there's some people in this age bracket have multiple accounts

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Speaker 3: and will explain why a little bit later, but that's

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Speaker 3: why that number sounds really high. And in terms of

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Speaker 3: those who are a bit older, those over sixty five

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Speaker 3: are the least likely demographic to have an account, So

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Speaker 3: this is really young people who are using this service.

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Speaker 1: And do we have any other inside about what kind

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Speaker 1: of financial habits an average B and PEL holder has.

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Speaker 3: Yeah, Well, interestingly, there's some other research from the Reserve

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Speaker 3: Bank of Australia that shows that if you have a

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Speaker 3: buy Now Pay Later account, you're less likely to have

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Speaker 3: a credit card than someone who doesn't have a buy

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Speaker 3: and Now Pay Later account. So according to the RBA,

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Speaker 3: this reflects that some customers who might not be eligible

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Speaker 3: for a credit card might actually be using a buy

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Speaker 3: Now Pay Later account instead.

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Speaker 1: And I'm interested to tease that out a little bit

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Speaker 1: more with you when we get to what the government

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Speaker 1: has proposed, because that's kind of one of these key

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Speaker 1: points of tension.

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Speaker 3: Yeah, so we'll come back to that. But one more

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Speaker 3: thing that I want to add is that a twenty

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Speaker 3: twenty two survey by Monash University found that those experiencing

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Speaker 3: financial stress are seventy five percent more likely to use

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Speaker 3: buying our pay Later systems. So it's particularly used by

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Speaker 3: Australians who are experiencing financial stress.

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Speaker 1: Okay, And the remarkable thing about this financial product is

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Speaker 1: that it's kind of come from nowhere. I mean, this

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Speaker 1: is quite new on the scene. When did it kind

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Speaker 1: of burst into everyone's financial planning.

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Speaker 3: Yeah, it has become very popular in the last decade

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Speaker 3: or so, but especially during the pandemic, which is quite interesting,

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Speaker 3: I think so. Just in twenty twenty, again, according to

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Speaker 3: the Reserve Bank, by Now Pay Later services grew by

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Speaker 3: over fifty percent in the second half of twenty twenty

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Speaker 3: compared to the same period a year earlier. That is

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Speaker 3: a huge growth in this industry. And in the last

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Speaker 3: financial year the value of buy now, Pay Later transactions

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Speaker 3: was about nineteen billion dollars.

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Speaker 1: And I think if you're a regular listener to this podcast,

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Speaker 1: there's this theme that emerges, whether we're talking about buy Now,

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Speaker 1: Pay Later, or AI or other kind of emerging areas

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Speaker 1: of tech, especially that the law takes a little bit

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Speaker 1: of time to catch up, and you know, there's this

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Speaker 1: sense of the law as always a few years behind,

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Speaker 1: and they're constantly doing reports, investigations, and now they have

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Speaker 1: actually come out with a position on how by now

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Speaker 1: pay later should be policed, right.

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Speaker 3: Yeah, and the government says that in this policy, they

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Speaker 3: say that the growth of a buy now, pay later

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Speaker 3: sector was not contemplated by policymakers who were drafting our

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Speaker 3: credit legislation.

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Speaker 1: So that's the legislation that governs things like a credit card,

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Speaker 1: and there's quite strict regulations around that. I mean, it's

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Speaker 1: not an uncommon experience to be rejected from a credit

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Speaker 1: card application, for example. So now let's get to the

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Speaker 1: BNPL legislation. What does it look like.

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Speaker 3: So, like we said, buy now, Pay later is not

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Speaker 3: right now regulated under the same frameworks as credit card companies,

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Speaker 3: and they actually fall under the exemption part of the

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Speaker 3: Australian Credit Act. And this has made it easier for

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Speaker 3: consumers to use buy now, Pay later because it doesn't

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Speaker 3: require the same approval as credit cards or loans which

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Speaker 3: check a person's credit history. So basically the Credit Act

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Speaker 3: is designed to make sure that someone is in the

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Speaker 3: right financial position to use a credit card, and that

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Speaker 3: is not a requirement for Buy now Pay Latter services

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Speaker 3: got it and so policy makers have identified a few

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Speaker 3: key concerns here, including excessive late payment fees and lack

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Speaker 3: of warnings about using the services. And basically, as we

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Speaker 3: mentioned above, people experiencing financial stress are the most likely

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Speaker 3: to use buy now, Pay Later, and that is an

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Speaker 3: area that the government wants to help solve.

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Speaker 1: Got it.

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Speaker 3: And we mentioned before that some people have multiple accounts. Yeah,

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Speaker 3: one reason for why that could happen is if you

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Speaker 3: get banned from one account because you've accumulated too much debt,

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Speaker 3: and then you just open another account with another provider,

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Speaker 3: and again you can accumulate too much debt there, and

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Speaker 3: then you just keep going from provider to provider, and

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Speaker 3: at the moment, there is no law that stops that

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Speaker 3: from happening.

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Speaker 1: Right. That's a really interesting point because these services are designed,

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Speaker 1: and this is what they'll tell you. They're designed to

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Speaker 1: make sure that you don't go into too much debt.

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Speaker 1: They'll kind of cut you off if they can see

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Speaker 1: that you're an unreliable person to pay it back. But

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Speaker 1: there's nothing stopping you from going to a couple and

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Speaker 1: all of a sudden that debt does become overwhelming exactly,

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Speaker 1: So what's the government doing or what's the government proposed

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Speaker 1: rather to actually do about all of this.

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Speaker 3: So it's proposing to take buy now, pay later schemes

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Speaker 3: out of the exemption list under the Credit Act, meaning

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Speaker 3: it will be regulated under the same laws as credit cards.

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Speaker 3: So under the bill introduced yesterday, buy now Pay Later

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Speaker 3: providers would need to have an Australian credit license and

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Speaker 3: would be subject to, like I said, the existing credit

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Speaker 3: card laws, which is regulated by the Australian Securities and

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Speaker 3: Investments Commission. Now, what does this mean for consumers for

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Speaker 3: the people listening, So it means that by now pay

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Speaker 3: later providers could need to check a person's credit score

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Speaker 3: and also assess whether a person is financially suitable to

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Speaker 3: pay back the credit that they're accumulating. And basically what

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Speaker 3: the government is saying is that they are trying to

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Speaker 3: protect financially vulnerable consumers from accumulating debt.

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Speaker 1: There's actually a really interesting example just over the ditch

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Speaker 1: in New Zealand where they've introduced similar legislation. They've kind

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Speaker 1: of said, if you're going to operate by now pay

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Speaker 1: later services in the country, you all have to follow

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Speaker 1: the same rule, and it kind of sounds like that's

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Speaker 1: what's happening here as well. What has the government said

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Speaker 1: about why this is so important?

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Speaker 3: So Assistant treasure Stephen Jones, who is the person who

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Speaker 3: has introduced this to Parliament, basically said, like I said before,

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Speaker 3: this is all about making the market a safer place.

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Speaker 3: Here's what he said on the ABC yesterday.

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Speaker 2: We want to ensure that those consumer protections that we

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Speaker 2: think are necessary for credit products apply to the buy

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Speaker 2: and ow pay later sector. And when we put in

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Speaker 2: place to these new laws, that's exactly what will happen.

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Speaker 2: It'll ensure that we maintain the great innovation and competition

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Speaker 2: that the buy and our pay later sector is introduced

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Speaker 2: into credit markets, but the same consumer protections will be

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Speaker 2: in place as well.

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Speaker 3: And also just a quick note that TDA did reach

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Speaker 3: out to the opposition for comment, but we didn't receive

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Speaker 3: a response at the time of recording this episode.

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Speaker 1: And as with any story that we try and do

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Speaker 1: on this podcast, I do think it's important to explore

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Speaker 1: some of the balance in this and hear from the

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Speaker 1: buy now payload companies themselves. Have they come out statements

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Speaker 1: since all of this has been released, and what's their

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Speaker 1: position on their role in consumers' lives.

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Speaker 3: Yeah, so, unsurprisingly there's quite a different story from after Pay,

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Speaker 3: which we've mentioned, and they're one of the major buying now,

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Speaker 3: pay later companies, so they've told a really different story

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Speaker 3: on the role they play in consumers' lives. They released

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Speaker 3: some of their internal research yesterday that showed that one

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Speaker 3: in three after pay users cited improvements in their financial

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Speaker 3: management while using the service, and they say that twenty

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Speaker 3: five percent said it allowed them to save more. So

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Speaker 3: they're basically saying that they're actually helping people financially, not

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Speaker 3: disadvantaging them. Further, Okay, and in terms of the company's

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Speaker 3: response to the government's proposal, when this legislation was in

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Speaker 3: an earlier draft phase, they submitted some feedback and they

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Speaker 3: said that they should only have to conduct partial credit checks.

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Speaker 3: But also importantly they did acknowledge concerns that this could

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Speaker 3: allow consumers to hide debts with other providers.

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Speaker 1: And so a partial credit check could look like no

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Speaker 1: touching base with one particular government agency to see if

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Speaker 1: you have a debt there or or you know, it

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Speaker 1: could be like if you've got unpaid for parking fine

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Speaker 1: or something. Yeah, it's not a full credit check that's

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Speaker 1: being proposed by the legislation, which would be as if

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Speaker 1: you're applying for a credit card, do you have any

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Speaker 1: other loans? How are you going with your mortgage, how

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Speaker 1: are you going with your hex? All that kind of stuff.

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Speaker 3: And one more response that I think is worth mentioning

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Speaker 3: is from ZIP, who are one of the other big

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Speaker 3: buy now, pay later companies. They also responded to the

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Speaker 3: government's proposal saying they already hold a credit license and

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Speaker 3: they also already conduct checks on customers they claim. They

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Speaker 3: also told the ABC quote, we are supportive of the

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Speaker 3: government holding all providers in the sector to the same

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Speaker 3: minimum standard.

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Speaker 1: Okay, so they're taking more of a kind of New

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Speaker 1: Zealand esque approach to how they want to operate within

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Speaker 1: the environment. It's really interesting that even within the buy now,

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Speaker 1: pay later sector, there's a diversity of opinions. And that's

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Speaker 1: not unlike any real industry. I mean, there's always going

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Speaker 1: to be differing ways to do this, but it's going

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Speaker 1: to be interesting to see what happens here because I mean,

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Speaker 1: these are not traditional conventional credit products, as the legislation

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Speaker 1: understands it, and so the law is trying to change

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Speaker 1: to meet the times, and you know it will impact

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Speaker 1: millions of people who currently use these services every day.

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Speaker 1: I think we'll leave the conversation there though. Thanks for

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Speaker 1: joining us Billy to explain that, and thank you for

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Speaker 1: listening to The Daily Oz. We'll be back again in

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Speaker 1: your ears tomorrow morning. If you enjoy that episode, drop

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Speaker 1: us a note in a comments tell us your experience

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Speaker 1: with buy Now, Pay Later. I think it's a really

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Speaker 1: valuable story for us all to engage in. Thank you

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Speaker 1: so much. We'll speak to you again tomorrow. My name

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Speaker 1: is Lily Maddon and I'm a proud Arunda Bunjelung Calcuttin

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Speaker 1: woman from Gadighl country.

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Speaker 3: The Daily oz acknowledges that this podcast is recorded on

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Speaker 3: the lands of the Gadighl people and pays respect to

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Speaker 3: all Aboriginal and Torrestrate island and nations. We pay our

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Speaker 3: respects to the first peoples of these countries, both past

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Speaker 3: and present.