‘Emerging’ BNPL fraud among risks to online retailers, says study

Fresh research on the subject of online payment fraud has calculated that the cost to eCommerce merchants will exceed $48 billion globally in 2023, with emerging methods, such as BNPL (Buy Now, Pay Later) fraud, proving lucrative for thieves.

Having become a steadily growing headache for those pushing their businesses online, this year the cost is expected to hit $41 billion and the pace of the problem is only being accelerated by the increasing use of alternative payment methods, such as digital wallets and BNPL. Fraudster attacks can include phishing, business email compromises and socially engineered fraud.

The risk with Buy Now, Pay Later is apparently exacerbated by the delayed nature of the payments. This expanded window gives fraudsters a bigger opportunity to make illegitimate payments using stolen cards prior to any red flags being raised. In turn, the research recommended that BNPL vendors conduct robust identity verification at the point of onboarding to mitigate these risks.

Fraudsters have also been found to be increasingly infiltrating BNPL accounts, using them to make unauthorised purchases, or to use the information to open alternative accounts. Banks, credit card firms, platform providers and companies can end up losing 100% of a loan’s value via this method.

Alternatively, synthetic identity creation is adding a further method to the fraudster’s arsenal and companies can be directly defrauded this way. The dark web is apparently awash with stolen credential information.

Combating the problem, while complex, is not impossible. Artificial intelligence is increasingly adapting to carry out and cross reference extensive background checks. When this information is shared with the broader industry, all while complying to data protection regulations, the database can become an effective tool in prevention.

Research author Nick Maynard explained: “To combat this fraud, eCommerce merchants must implement simple steps such as address verification, combined with risk-based scoring on transactions, which will allow merchants to best mitigate the massive fraud threats present.”

The diversity of approach that fraudsters now use is part of the ever-evolving problem. To name just a few, crooks now use methods including account takeover, friendly fraud, chargeback fraud, affiliate fraud, re-shipping, botnets, phishing, whaling, pharming, triangulation and pagejacking. All of these are explained in depth within the Juniper research, downloadable with a registration here.

The research identified North America as having the largest fraudulent transaction value of any regional market, accounting for over 42% of global fraud by value in 2023, despite representing less than 7% of banked individuals globally.

The research cited the vast volume of data breaches and the broad availability of stolen credit card information as the key risk factors in this market.

Western Europe accounted for 26% of all online fraud.