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As a foreigner in Australia, I can't help but to think that Australians really don't know how to handle finances and are too irresponsible to use a credit card,

As a foreigner in Australia, I can't help but to think that Australians really don't know how to handle finances and are too irresponsible to use a credit card, so Afterpay and Zip stepped in. Maybe it's because I grew up in Europe, but "Don't buy it if you can't afford it" has served me well. The majority of people I know just use credit cards for the perks but never miss a full payment.

robertwt7 5y ago
Actually, the biggest afterpay's market is in US.
- shell0x 5y ago
  Oh wow, I didn't know that :)
siquick 5y ago
I’ve lived in Australia for 10 years and still cannot believe how flippant people here seem to about getting into debt. Tens of thousands of dollars of credit card debt, a mortgage covering 60% of a salary, and a leased car seem to be fairly standard for a lot of my peers. It feels like they’re all 3 missed months of salary away from having absolutely nothing. Obviously all anecdotal but still astounding and probably not too uncommon here in Sydney.
- catmanjan 5y ago
  Other than mortgage (and HECS) nobody I know uses debt - Australians love second hand cars
  - Tehdasi 5y ago
    So basically it's 90+% of debt for housing (scroll down to the pie chart): https://www.finder.com.au/australias-personal-debt-reported-as-highest-in-the-world https://www.finder.com.au/australias-personal-debt-reported-... I'm including 'Investment debt' cause who are we kidding? It's all investment properties.
    - siquick 5y ago
      Feels like that chart is slightly misleading - it’s easy for credit card debt to appear to be low when there are so many high value mortgages. $20k CC debt is only 2% of the value of a $1m mortgage.
    - dannyw 5y ago
      huh? plenty of brokers offer margin trading at decent interest rates.
- megablast 5y ago
  Compared to what?? Canada?? The us?? Uk???
- pcurve 5y ago
  Sounds 100% like America. :-/
  - shell0x 5y ago
    I'm not American, so I have less insight than you perhaps, but I'd say America is much more affordable than Australia. In Australia most jobs are in Sydney and Melbourne. Perth is mostly for mining and Brisbane doesn't have many tech jobs. Real estate prices in Sydney and Melbourne are in the million(s), but incomes are ~100+k AUD. Some people earn 200k+ as a principal engineer, but that's pretty much it. In America you have much more cities where you can find a decent job and different lifestyle. If New York is too expensive, you can move to Raleigh, NC. I don't think that exists in Australia. There is also a very low degree of innovation in Australia, it's all related to real estate and mining. Personally I just feel like it's not worth building a life here unless you get a large inheritance, but for an immigrant, America is a much better place to build a future.
    - djrobstep 5y ago
      I think you're underselling Sydney a bit there - there is a google campus, Atlassian, and a lot of finance companies offering high salaries. Not SV level, but pretty close. Melbourne is pretty decent for high end tech jobs, but not as good as Sydney. Certainly real estate is extremely expensive and broken, but it's not like New Zealand where the real estate is almost as expensive but the pay is much lower. I had to leave for this reason - New Zealand's housing crisis is much worse in real terms.
      - nsonha 5y ago
        > a lot of finance companies offering high salaries. Not SV level, but pretty close. How close? let's say AUD 300k (I'm honestly curious, does Optiver/Atlassian/Google even pay that much here?) which is a mind-blowing salary in Australia, tops all kinds of taxes, it converts to USD 220K give or take, adjusted for higher taxes and cost of living, down to about 200k. So a top earner 0.1% in Sydney makes as much as a strong 3 yoe engineer in America.
- jeeeb 5y ago
  The flip side of this is that: 1. As long as your LVR isn’t too high your interest payments on a home loan will probably come in well below what renting an equivalent house would cost. Further rent will generally rise over time with inflation, whereas your interest will decrease to zero over time as you pay down the loan. 2. If you’ve got a home loan with a 100% offset account (very, very common in Australia) then a credit card makes financial sense. I purchase everything on credit and pay the full balance each month. I pay no interest, earn points and this maximises the amount of money in my offset account at any one time. 3. Depending on your usage and tax situation a noveated lease (car lease) can make good financial sense.
  - nl 5y ago
    These are all entirely correct. The thing worth pointing out that explains how both this, and the person you are replying to are correct is that in Australia we haven't had an unemployment crises since the 1990s. If you have never seen unemployment, and can't imagine not having a job then arranging your affairs for tax efficiency makes perfect sense, even if it means you are carrying more debt.
Clewza313 5y ago
Australia has gone 20+ years without a recession, meaning many people have grown up without ever seeing anything except full employment and house prices going up up up. It's thus been a "safe bet" to leverage yourself up to your eyeballs to get on that "property ladder", and while many (including myself) thought this would finally pop last year with COVID, nope, after the briefest hiccup the property market has gone even more nuts this year.
- jokethrowaway 5y ago
  That's likely a combination of extra money being printed, maybe people doing more remotes and looking for better houses, government schemes to prop the house prices up (eg. by slashing taxes on property). There is still time for a pop once governments decide things are normal again after covid.
  - girvo 5y ago
    > There is still time for a pop once governments decide things are normal again after covid. While thats true on its face, in practice trying to make that bet is a fools errand at this point. People have been telling me that for a decade plus, now. It still hasn't happened, and the Australian economy (and household wealth) is inextricable intertwined with real estate -- I can't see any government deciding to let it "pop", personally.
    - denkmoon 5y ago
      If you were to use one word to describe governance in Australia, it would be reactive. They won't let it pop, but that doesn't mean it won't. Of course, timing it is the big bet, not predicting if it will happen.
      - hnick 5y ago
        As a naturally risk averse Australian it's been incredibly frustrating. Even 15-20 years ago I was thinking this can't keep going. Turns out I just should've invested everything I own.
ttam 5y ago
Ironically, Klarna, a Swedish-founded company, is pretty big in the BNPL market according to https://www.marketwatch.com/story/the-buy-now-pay-later-wave-klarna-affirm-and-rivals-hope-to-take-u-s-by-storm-11622225931 https://www.marketwatch.com/story/the-buy-now-pay-later-wave... "In Sweden, home to BNPL provider Klarna, installments accounted for 23% of e-commerce transactions last year."
- shell0x 5y ago
  Sorry, I should have said Germany instead of Europe since the European market is pretty diverse. The German word for debt is schuld(Schulden), which has the same meaning as guilt and is associated with something bad.
  - hashmush 5y ago
    Unsurprisingly, the same word in Swedish is skuld, with the same double meaning.
  - grumpy-de-sre 5y ago
    As an Australian living in Germany I've got to point out that finances in Germany are just as dysfunctional as Australia. Just in completely opposing ways. Both are a burden on sustainable growth and development. For some examples of Germany's issues it's worth looking at the weak state of retail banking (Deutsche Bank / Commerzbank proposed merger), and the financial scandals.
  - imtringued 5y ago
    The Germans are so spooked by debt they rather hand the debt to weaker countries even though the German economy can sustain much higher debt levels than their neighbors. It's completely backwards.
- danpalmer 5y ago
  Klarna is huge in the UK too. I'm inclined to believe another commenter who suggested that millennials and younger don't really like credit cards, and this is a different way to get a similar thing – better cash flow.
daniel-grigg 5y ago
Being responsible is a tough call give that institutions in Australia charge enormous interest rates on credit cards, typically 20%+. I find it staggering that they can get away with it actually. Regardless, many (less ‘responsible’) consumers get burnt by this and spend years paying down debts, so I’m not surprised these BNPL players have seen such success. Also they’ve done well appealing with younger consumers. How though I’m not sure exactly, is it a mix of attributes like mobile first product and the simplicity of accessing credit compared to traditional banks or is there something more overarching?
- humanlion87 5y ago
  >institutions in Australia charge enormous interest rates on credit cards, typically 20%+. I think that is the case as well in the US. Credit card interest rates are atrociously high. Which makes it difficult for people who get caught in the CC debt-loop to get out.
- dannyw 5y ago
  For the first couple years of operation afterpay had no credit checks and no identity checks.

robertwt7 5y ago

Actually, the biggest afterpay's market is in US.

shell0x 5y ago
Oh wow, I didn't know that :)

siquick 5y ago

I’ve lived in Australia for 10 years and still cannot believe how flippant people here seem to about getting into debt. Tens of thousands of dollars of credit card debt, a mortgage covering 60% of a salary, and a leased car seem to be fairly standard for a lot of my peers. It feels like they’re all 3 missed months of salary away from having absolutely nothing. Obviously all anecdotal but still astounding and probably not too uncommon here in Sydney.

catmanjan 5y ago
Other than mortgage (and HECS) nobody I know uses debt - Australians love second hand cars
- Tehdasi 5y ago
  So basically it's 90+% of debt for housing (scroll down to the pie chart): https://www.finder.com.au/australias-personal-debt-reported-as-highest-in-the-world https://www.finder.com.au/australias-personal-debt-reported-... I'm including 'Investment debt' cause who are we kidding? It's all investment properties.
  - siquick 5y ago
    Feels like that chart is slightly misleading - it’s easy for credit card debt to appear to be low when there are so many high value mortgages. $20k CC debt is only 2% of the value of a $1m mortgage.
  - dannyw 5y ago
    huh? plenty of brokers offer margin trading at decent interest rates.
megablast 5y ago
Compared to what?? Canada?? The us?? Uk???
pcurve 5y ago
Sounds 100% like America. :-/
- shell0x 5y ago
  I'm not American, so I have less insight than you perhaps, but I'd say America is much more affordable than Australia. In Australia most jobs are in Sydney and Melbourne. Perth is mostly for mining and Brisbane doesn't have many tech jobs. Real estate prices in Sydney and Melbourne are in the million(s), but incomes are ~100+k AUD. Some people earn 200k+ as a principal engineer, but that's pretty much it. In America you have much more cities where you can find a decent job and different lifestyle. If New York is too expensive, you can move to Raleigh, NC. I don't think that exists in Australia. There is also a very low degree of innovation in Australia, it's all related to real estate and mining. Personally I just feel like it's not worth building a life here unless you get a large inheritance, but for an immigrant, America is a much better place to build a future.
  - djrobstep 5y ago
    I think you're underselling Sydney a bit there - there is a google campus, Atlassian, and a lot of finance companies offering high salaries. Not SV level, but pretty close. Melbourne is pretty decent for high end tech jobs, but not as good as Sydney. Certainly real estate is extremely expensive and broken, but it's not like New Zealand where the real estate is almost as expensive but the pay is much lower. I had to leave for this reason - New Zealand's housing crisis is much worse in real terms.
    - nsonha 5y ago
      > a lot of finance companies offering high salaries. Not SV level, but pretty close. How close? let's say AUD 300k (I'm honestly curious, does Optiver/Atlassian/Google even pay that much here?) which is a mind-blowing salary in Australia, tops all kinds of taxes, it converts to USD 220K give or take, adjusted for higher taxes and cost of living, down to about 200k. So a top earner 0.1% in Sydney makes as much as a strong 3 yoe engineer in America.
jeeeb 5y ago
The flip side of this is that: 1. As long as your LVR isn’t too high your interest payments on a home loan will probably come in well below what renting an equivalent house would cost. Further rent will generally rise over time with inflation, whereas your interest will decrease to zero over time as you pay down the loan. 2. If you’ve got a home loan with a 100% offset account (very, very common in Australia) then a credit card makes financial sense. I purchase everything on credit and pay the full balance each month. I pay no interest, earn points and this maximises the amount of money in my offset account at any one time. 3. Depending on your usage and tax situation a noveated lease (car lease) can make good financial sense.
- nl 5y ago
  These are all entirely correct. The thing worth pointing out that explains how both this, and the person you are replying to are correct is that in Australia we haven't had an unemployment crises since the 1990s. If you have never seen unemployment, and can't imagine not having a job then arranging your affairs for tax efficiency makes perfect sense, even if it means you are carrying more debt.

Clewza313 5y ago

Australia has gone 20+ years without a recession, meaning many people have grown up without ever seeing anything except full employment and house prices going up up up. It's thus been a "safe bet" to leverage yourself up to your eyeballs to get on that "property ladder", and while many (including myself) thought this would finally pop last year with COVID, nope, after the briefest hiccup the property market has gone even more nuts this year.

jokethrowaway 5y ago
That's likely a combination of extra money being printed, maybe people doing more remotes and looking for better houses, government schemes to prop the house prices up (eg. by slashing taxes on property). There is still time for a pop once governments decide things are normal again after covid.
- girvo 5y ago
  > There is still time for a pop once governments decide things are normal again after covid. While thats true on its face, in practice trying to make that bet is a fools errand at this point. People have been telling me that for a decade plus, now. It still hasn't happened, and the Australian economy (and household wealth) is inextricable intertwined with real estate -- I can't see any government deciding to let it "pop", personally.
  - denkmoon 5y ago
    If you were to use one word to describe governance in Australia, it would be reactive. They won't let it pop, but that doesn't mean it won't. Of course, timing it is the big bet, not predicting if it will happen.
    - hnick 5y ago
      As a naturally risk averse Australian it's been incredibly frustrating. Even 15-20 years ago I was thinking this can't keep going. Turns out I just should've invested everything I own.

ttam 5y ago

Ironically, Klarna, a Swedish-founded company, is pretty big in the BNPL market according to https://www.marketwatch.com/story/the-buy-now-pay-later-wave-klarna-affirm-and-rivals-hope-to-take-u-s-by-storm-11622225931 https://www.marketwatch.com/story/the-buy-now-pay-later-wave... "In Sweden, home to BNPL provider Klarna, installments accounted for 23% of e-commerce transactions last year."

shell0x 5y ago
Sorry, I should have said Germany instead of Europe since the European market is pretty diverse. The German word for debt is schuld(Schulden), which has the same meaning as guilt and is associated with something bad.
- hashmush 5y ago
  Unsurprisingly, the same word in Swedish is skuld, with the same double meaning.
- grumpy-de-sre 5y ago
  As an Australian living in Germany I've got to point out that finances in Germany are just as dysfunctional as Australia. Just in completely opposing ways. Both are a burden on sustainable growth and development. For some examples of Germany's issues it's worth looking at the weak state of retail banking (Deutsche Bank / Commerzbank proposed merger), and the financial scandals.
- imtringued 5y ago
  The Germans are so spooked by debt they rather hand the debt to weaker countries even though the German economy can sustain much higher debt levels than their neighbors. It's completely backwards.
danpalmer 5y ago
Klarna is huge in the UK too. I'm inclined to believe another commenter who suggested that millennials and younger don't really like credit cards, and this is a different way to get a similar thing – better cash flow.

daniel-grigg 5y ago

Being responsible is a tough call give that institutions in Australia charge enormous interest rates on credit cards, typically 20%+. I find it staggering that they can get away with it actually. Regardless, many (less ‘responsible’) consumers get burnt by this and spend years paying down debts, so I’m not surprised these BNPL players have seen such success. Also they’ve done well appealing with younger consumers. How though I’m not sure exactly, is it a mix of attributes like mobile first product and the simplicity of accessing credit compared to traditional banks or is there something more overarching?

humanlion87 5y ago
>institutions in Australia charge enormous interest rates on credit cards, typically 20%+. I think that is the case as well in the US. Credit card interest rates are atrociously high. Which makes it difficult for people who get caught in the CC debt-loop to get out.
dannyw 5y ago
For the first couple years of operation afterpay had no credit checks and no identity checks.