Bad Santa: “Buy Now, Pay Later” A Hit With Consumers And Cybercriminals

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Buy Now, Pay Later (BNPL) will help fuel a $ 1,000,000 ecommerce windfall this holiday season. But that’s only if the cyber thieves don’t get away with all the profits. We learn from Armen Najarian, CMO and CIO at seeing, how to put BPNL fraud on ice

As the holiday shopping season is in full swing, Buy Now, Pay Later (BNPL) apps and services are catching fire with consumers, merchants and scammers preying on them. But who will keep the bag?

BNPL platforms like Zilch, Afterpay, Klarna, and Sezzle have helped traders and others find gold by allowing consumers to buy virtually anything – game consoles, alcohol, rent and charges, etc. – and then repay it in monthly installments, often without interest.

As an unregulated form of credit, BNPL has exploded with COVID-19 as consumers shifted many purchases to digital channels. And he’s showing no signs of slowing down. According to BBC, over 17 million UK consumers have used Buy Now, Pay Later options. And in the United States, BNPL purchases are expected to exceed $ 100 billion for the full year 2021, compared to just $ 24 billion in 2020. Globally, CB Insights predicts that purchasing volumes of BNPL could increase as much as 10-15x by 2025.

But none of this comes without risk, of course. Already, as much as a third of all consumers who used Buy Now, Pay Later were behind on one or more payments, with 72% seeing a drop in their credit card score. And now fraudsters are finding clever ways to exploit this innovative form of financing.

Winter storm warning: BNPL is about to explode this Christmas

The potential for loss was always going to be great with BNPL. Customers receive merchandise before paying a dime, making it an irresistible lure for consumers and scammers alike.

According to CNBC, cybercriminals are increasingly exploiting stolen login credentials to hack into BNPL-activated accounts, leaving the unsuspecting victim to foot the bill. They also find ways to play BNPL account registration to defraud traders and other businesses. It turns out that some companies do not perform formal credit checks on listing, but instead “rely on internal algorithms to determine creditworthiness based on the information they have.”

Throw in the 4 in 10 Americans and the 1 in 10 Britons considering using BNPL this Christmas, and that could cause all kinds of problems. Account recovery (ATO) attacks now represent more than $ 16 billion in annual losses. And Account Enrollment Fraud Using Compromised Identity Information To Access Personal Loans Contributes To Annual Losses Of Over USD 57 billion. Moreover, according to the FBI, at least $ 6 billion this can be attributed to the use of synthetic identities, which is the least likely to be flagged by traditional metrics and is one of the fastest growing financial crimes.

It could prove disastrous if better protections are not put in place as BNPL volumes explode this holiday season and beyond.

Stop the Grinch from eating your profits

Tackling these threats will not be easy. But anti-fraud solutions using machine learning, data science, and shared world intelligence can dramatically reduce losses resulting from BNPL fraud, including connections, registrations, illicit transactions, etc.

By authenticating users behind the scenes, these solutions prevent fraudulent access or activity before it happens while providing a seamless and frictionless flow for legitimate customers. In fact, today’s most robust solutions have been shown to prevent 95% of all losses due to fraud with a low intervention rate of 5%.

Organizations looking for an extra layer of protection can also look for options to enroll new account holders using biometric facial detection capabilities to prevent fraudsters from opening new accounts with stolen or synthetic identity information. The technology that powers this capability relies on FIDO2-Compliant biometric facial detection to validate a living human face against government issued ID, and verification of facility documents against third-party databases.

“Ho, ho, ho” or “No, no, no”?

Microsoft’s plans to include an integrated BNPL function in his Edge browser, despite concerns about Buy Now, Pay Later couldn’t come at a more crucial time.

BNPL platforms, ISPs, and their merchant customers around the world will be tempted to lower fraud protections during what should be a holiday e-commerce boon. nearly $ 1,000 billion. Let’s all hope smarter organizations embrace technologies that allow them to improve the registration and transaction experience for legitimate buyers while leaving out BPNL fraud.

About Armen Najarian

Armen Najarian is CMO and Chief Identity Officer at Outseer, a leading technology company in the fight against payment fraud. He is responsible for the overall strategy and execution of the business. Prior to joining Outseer, Najarian’s most recent roles included Marketing Director positions at Agari and ThreatMetrix, the latter of which he established as the definitive leader in the category of digital identity solutions.

About Outseer

Outseer, an RSA company, enables the digital economy to grow by authenticating billions of transactions each year. Our payment and account monitoring solutions increase revenue and reduce customer friction for card issuing banks, payment processors and merchants around the world. Leveraging 20 billion annual transactions from 6,000 global institutions contributing to the Outseer Data Network, our identity-based science delivers the highest fraud detection rates and lowest customer response in the industry.
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