Voice of the Industry

BNPL: Maximising the rewards, minimising the risks

Tuesday 4 October 2022 09:30 CET | Editor: Raluca Ochiana | Voice of the industry

Amir Nooriala, Chief Strategy Officer at Callsign, presents BNPL fraud challenges that target both businesses and consumers.

 

Buy now, Pay Later has taken the payments world by storm. Customers have been quick to adopt this new payment method, fuelled by the ability to spread the cost of payments, with one in five consumers admitting to making an unplanned purchase based on BNPL as an option at checkout.

For businesses, BNPL is awash with opportunities. Ecommerce organisations are enjoying a marked increase in sales and ticket prices. Banks and financial organisations are also in a strong position to reap the rewards, with increased revenue and customer retention resulting from such offerings.

However, as with any other type of monetary transfer, the bad actors – the fraudsters and scammers – have not been slow to see their own opportunities around BNPL. And, if businesses aren’t aware of the threats and the ways to mitigate them, the pendulum could swiftly swing from opportunity to crisis, as consumers begin to lose trust in providers and merchants. 

BNPL and fraud

Fake account creation and account takeover are just a few of the vectors we’ve seen used to attack BNPL services. Fake accounts using stolen credentials, often harvested from more than one victim, are hard to detect and look authentic, building up credibility before a large payout is made. 

According to our research, account takeover fraud (ATO) makes for 22% of malicious BNPL activities. Along with scam sites, looking to harvest consumer details to conduct fraud elsewhere, it’s not surprising, then, that across the world, one in eight BNPL users have been a victim of fraud.

Navigating the BNPL challenges

That figure is a cause for concern for all stakeholders – not just customers, but ecommerce businesses, banks and BNPL providers. In a packed marketplace with fierce competition, even a single instance of fraud can be disastrous for a business, with almost one in five victims stating they will no longer use any BNPL service.

But fraud is not only impacting the trust that a victim may have in the BNPL provider. According to our research, nearly a quarter of victims will no longer return to the website where they purchased the good after experiencing a fraud attempt or a fraud attack, undermining the entire ecosystem. 

Given the demographics surrounding BNPL customers, that’s hardly surprising. BNPL offerings have resonated particularly stronger with Gen Z and Millennials, the younger ‘digitally native’ users who account for 57% of BNPL’s user base. And accordingly, that’s the same demographic that’s most likely to fall foul of BNPL fraud – disproportionately so. 

59% of fraud victims are in the 18-34 group – that’s nearly three times the number of those aged 55 and over.

If those figures are alarming, it’s worth remembering that there are other forms of damage that BNPL fraud incurs. Aside from the straightforward impact on revenue, there is also the reputational harm that can result from dissatisfied customers sharing their experiences on social media platforms, a factor that can potentially hit an organisation’s bottom line harder than all the above combined.



Cracking the BNPL conundrum

At the heart of that mindset is trust – or rather, a loss of it. Trust takes a long time to build and can be lost in seconds. Or, in the case of BNPL frauds and scams, in a single click.

Building and maintaining that trust is pivotal to the success of BNPL. But despite its huge popularity, there is still a long way to go. Currently, only 42% of consumers trust providers to protect them from fraud, with 51% more likely to trust a BNPL service provided by a bank. That’s still a number on the low side.

And that has far-reaching implications for not just any single group of stakeholders, but for the entire BNPL ecosystem. The loss of trust has the potential for a domino effect where everyone stands to lose out: merchants, banks, providers, and customers.


Let your customers get on with digital life

Customers want that trust to exist, with 45% expecting any business offering BNPL to protect them from fraud. But in such a rapidly growing digital industry, this shouldn’t be at the expense of the customer experience. It’s a difficult balance to strike, and likely why it’s often prioritised over fraud prevention. 

For those businesses, the key to doing that is to put the right solutions in place – solutions that consider security and user experience equally. 

Organisations such as Callsign offer a full suite of technologies that layer device, threat, and behavioural intelligence, allowing all BNPL stakeholders – banks, merchants, and providers – to offer their customers and partners watertight fraud protection that doesn’t compromise the customer experience.

BNPL is here to stay, and it's imperative that organisations protect themselves from fraud and scams. Failing to do so runs the risk of ‘paying later’ becoming the main issue.

If you’re interested in learning more, you can download this complimentary BNPL report from the 451 Group (S&P Global Market Intelligence)

All statistics are taken from Callsign-commissioned research in BNPL and consumer trust.

 

This article was first published in Payment Methods Report 2022, the most updated overview of trends and developments in the payment methods space and the innovative technologies that these methods work upon, emerging consumers habits, and strategies on how to win at conversion and retention.


About Amir Nooriala

Amir Nooriala is the Chief Strategy Officer (CSO) at Callsign, responsible for the customer and partner strategy alongside sales.  Previously, Amir has held roles including CSO and COO at OakNorth, Ops and Tech MD at BGC, and has also worked at Barclays Investment Bank, Accenture, and Cisco Systems. 

 

 

About Callsign  

Callsign makes digital life smoother and safer by helping organisations establish and preserve digital trust so people can get on with their digital lives. The first true representation of identity online, Callsign positively identifies users by their unique characteristics, replicating real-life recognition signals with AI models. The only solution to identify people across every journey, channel, and brand, Callsign makes digital identification seamless and secure, helping drive business growth.  

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Keywords: payment methods, fraud prevention, BNPL, ecommerce, risk management
Categories: Payments & Commerce
Companies: Callsign
Countries: World
This article is part of category

Payments & Commerce

Callsign

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