The Benefits and Challenges of BNPL

It’s easy to see why buy now, pay later (BNPL) options are so appealing for consumers.

They want the things they want right away, but they might unable — or unwilling — to pay the entire cost upfront.

“Don’t worry,” BNPL says to these consumers. “You can get the thing you want and pay for them in a few installments.”

It’s like the old-fashioned layaway system, but instead of having to pay off the balance of what you owe to take your merchandise home, you get the item immediately.

However, there’s a challenge associated with BNPL for both customers and merchants alike: fraud. Fraudsters routinely threaten BNPL users, most often through account takeover (ATO) schemes.

How BNPL Fraud Works

Fraudsters cannot only get access to users’ payment information for use elsewhere, they also can log on to any eCommerce site that accepts the BNPL provider and purchase goods with the victim’s card.

This is a common tactic for other payment services, but it is especially effective with BNPL, as the victim isn’t immediately billed and may not notice the activity right away.

Other fraud cases involve criminals weaponizing chargebacks to cheat BNPL firms. Fraudsters immediately dispute purchases — made with their own cards or stolen cards — attempting to get the charges reversed while keeping the items or even reselling them.

Despite the risk of fraud, BNPL users remain mostly positive about their experience with this payment method. Most BNPL users say they’ve used the method more than once, and 80% reported it was easy to use such an option at the point of purchase.

Provided companies remain diligent about protecting their legitimate customers, BNPL could continue to be an attractive way to pay.

To learn more, download the latest edition of the Alternative Payments Tracker, a PYMNTS and Socure collaboration.