If you think 2021 was a blockbuster year for Buy Now, Pay Later (BNPL), just wait until you see the sequel.
But fair warning: Fraudsters already have a front-row seat.
Over the past year, platforms such as Afterpay, Affirm, Sezzle, and Klarna have helped consumers make $100 billion in purchases for everything from PlayStations to pet food to insurance premiums. That’s a $76 billion increase in just 12 months. And there are no signs of slowing down.
Today, nearly every US retailer from Target to Big Lots to American Eagle offers BNPL options, which typically allow customers to pay for purchases in fixed installments, often with zero interest. According to Insider Intelligence, global Buy Now, Pay Later spend is set to hit $680 billion in volume by 2025.
As PYMNTS reports, merchants, banks, and even card issuers are actively expanding into new forms of BNPL for wealthy consumers and even B2B financing. In the inflationary moment we’re living through, this could accelerate BNPL’s growth beyond even the most bullish of estimates.
Unfortunately, cybercriminals have noticed—and see plenty of opportunity to achieve exponential growth of their own.
BNPL: A Fraudster’s Paradise?
As BNPL installment usage explodes, fraudsters are flocking to channels like Telegram to offer tips on infiltrating BNPL customer accounts using compromised login credentials in order to go on illicit shopping sprees. To hear victims tell it, BNPL account takeover (ATO) attacks can be far more ruinous—emotionally and financially—than many realize.
What’s more, fraudsters are also leveraging synthetic identity information to hijack the BNPL enrollment process in order to defraud merchants and other companies directly.
According to the FBI, synthetic identity fraud is a $6 billion problem that the FBI calls one of the fastest-growing forms of financial crime. And ATO fraud growth has been fueled by the surge in data breaches in recent years, increasing 850% between Q2 2020 and Q2 2021, according to studies from Sift.
That figure is likely to climb—and the reputational damage to BNPL service providers and their customers could be disastrous.
Enormous Opportunity, Profound Risks
All these data points about BNPL growth rates can mask another reason this innovative form of finance is set to boom. Today, BNPL still accounts for just a small percentage of retail sales—which suggests the potential for enormous growth for years to come. Unfortunately, that’s also true of fraud.
Cyberthieves are just getting started in this space. Card-not-present (CNP) fraud accounts for over half of all gross fraud losses worldwide—despite hardened defenses and highly-regulated credit practices. According to the Aite-Novarica Group, loss from CNP fraud is expected to top $17.2 billion by 2023.
In an environment like this, BNPL could get bludgeoned by ever-more sophisticated attacks. In order to protect themselves, organizations across the BNPL ecosystem will need to implement defenses against new risks and evolving attack modalities beyond traditional CNP fraud—without sacrificing convenience and choice for consumers.
The good news: Help is on the way.
Stopping Bad Guys, Not BNPL
I can’t begin to tell you how exciting it is to introduce Outseer Emerging Payments—the first expansion beyond our market-leading Outseer 3-D Secure payment authentication offering to enable growth and customer value beyond traditional CNP transactions. Buy Now, Pay Later Installments represents our first payments solution within the new Outseer Emerging Payments platform.
Through this investment, Outseer will enable an entire ecosystem of customers, financial institutions, merchants, and other fintech providers to deliver more secure programs by providing continuous authentication and protection.
It’s also the natural, next step in our strategic evolution.
Outseer itself is the culmination of decades of science-driven innovation in payments and fraud prevention powered by the application of advanced data science and global data network spanning thousands of customers and partners.
Building on this foundation, Outseer Emerging Payments will deliver essential, continuous authentication to protect against fraud across the entire payments journey—spanning all interactions and transaction types. This includes end-to-end protection for cardholders as they enroll, shop and pay, and manage BNPL installment transactions.
To learn more about Outseer Emerging Payments and our BNPL Installment offerings, visit:
Outseer Emerging Payments™ platform
Outseer Buy Now, Pay Later installments solution