Since 2019, Buy Now Pay Later (BNPL) transactions have grown by 400 percent. Now, this payment method makes up 14 percent of all global e-commerce transactions.
That exponential growth means BNPL has undoubtedly become an integral part of the online shopping experience. However, that popularity also means it attracts a staggering amount of fraudsters, who exploit the system to acquire “free” merchandise.
Retailers who want to avoid the risks associated with BNPL should focus on understanding the phenomenon to develop proactive strategies that avoid Buy Now Pay Later fraud.
The Risks of Buy Now Pay Later Fraud
There are several ways scammers defraud BNPL systems, including:
While many of these target consumers, the impact of Buy Now Pay Later fraud isn’t limited to consumers. Merchants may not lose money from this fraud, but they can lose the core of their business: consumers.
BNPL fraud, specifically account takeover or repayment fraud, can restrict legitimate consumers from accessing the service.
Multiple consumers within a specific retail demographic could be affected, limiting their purchasing power.
Take plus-size clothing as an example.
If legitimate consumers have their credentials stolen by scammers, they could have their access to the Buy Now Pay Later provider restricted, blocking them from using this method to make future purchases.
Retailers targeting a specific demographic could see their sales drop by at least 14 percent.
There are even greater risks.
Although BNPL fraudsters typically target big-ticket items, that doesn’t mean merchants selling items of lesser value are out of the woods. Fraudsters can and will target any business where there’s potential to get an item (or items) for free.
Some fraudsters may even use BNPL to purchase large quantities of in-demand items with the intent of reselling these items. This type of fraud could affect an item’s perceived worth as scammers can flood the market with products at a considerable discount because they paid nothing for these items.
Plus size loungewear, a popular segment in the retail clothing market, could become a target of such fraudsters. However, plus-size clothing and plus size loungewear vendors can protect their businesses from falling victim to BNPL fraud by implementing best practices.
Best Practices to Avoid Buy Now Pay Later Fraud
Retailers in a niche market should turn to their suppliers as their preferred resource to avoid BNPL fraud. For example, plus-size loungewear retailers can turn to 66disco.com wholesale plus-size clothing suppliers to gain insight into safeguarding their plus-size loungewear business from Buy Now Pay Later fraud.
Retailers in other market segments can do the same with their industry-specific suppliers.
On a granular level, retailers can also protect themselves and their consumers by implementing stricter identification methods, especially for first-time purchases. To avoid overcomplicating the checkout process for legitimate shoppers, retailers can implement a text, email, or face recognition authorization to the checkout process. This one-click process has the power to deter fraudsters from attempting to commit BNPL fraud.
