Buy Now Pay Later - the convenient way for customers to receive their goods without needing to pay out immediately. However, this surge in customer convenience is leading to headaches for businesses trying to stay ahead of fraudsters.
After all, you need to balance the convenience that customers expect while maintaining high levels of fraud protection.
How do fraudsters take advantage of relaxed onboarding?
Having an onboarding process that’s convenient for customers to use means customer due diligence checks might not be as robust as they need to be.
These relaxed checks allow fraudsters to gain access in various ways:
- Signing up with stolen credentials
- Attempting to take over existing accounts
- Ordering goods with no intention of paying for them
- Hiding the original source of the money for money laundering purposes
What makes Buy Now Pay Later easy to exploit?
While customers find them attractive for their ease of access, fraudsters are exploiting this for their own means.
- Minimal identity verification creates opportunities for third-party fraud
- Low barriers to entry make it easier for bad actors to slip in
- High-value goods increase financial losses for businesses
- Deferred repayment allows fraudsters to go undetected for a while
- Rapid approval increases risk without adequate safeguards
- High volumes of transactions make it easier to hide fraudulent activity amongst legitimate activity
How can you prevent Buy Now Pay Later fraud?
As the saying goes, “Prevention is better than the cure”, so if you’re looking to protect your customers, you need to ensure you have robust prevention measures in place.
Identity Verification
Although your customers appreciate the speed of signing up to use Buy Now Pay Later, you still need to verify their identity. This means you need robust, yet simple, Know Your Customer (KYC) checks during your onboarding process, such as MLVerify’s Custom KYC Profiles, which request documents that are specific to your needs.
Transaction Monitoring
The same as any other AML process, you need to ensure that no suspicious transactions are taking place within the Buy Now Pay Later accounts. For example, are there frequent transactions, or unusually larger amounts? When transactions such as these take place, you need to investigate promptly.
Address Verification
Are the shipping addresses raising eyebrows, or not matching what you would expect from the clients? Ensuring the addresses are accurate is an essential part of any KYC checks; this still holds true for Buy Now Pay Later accounts.
However, you also need to check that the Buy Now Pay Later accounts are being accessed from expected locations, as anything unexpected could mean KYC checks need to be repeated.