Buy now, pay later makes checkout fast. That's the problem. Criminals have found a way to exploit it, and most merchants have no idea it's happening until chargebacks start piling up. If your store offers BNPL at checkout, especially for fast shipping or digital items, you may already be a target.
What Is Buy Now Pay Later Fraud?
Buy now pay later fraud happens when someone uses a BNPL service like Klarna, Afterpay, Affirm, or Sezzle to make purchases using stolen or synthetic identities. The fraudster receives the goods or services, but never pays the bill. Merchants are left footing the cost, often after it's too late to stop fulfillment or dispute the charge.
What makes this type of fraud especially tricky is that many BNPL platforms don't share full customer payment details with the merchant. That means your fraud filters can't evaluate the order like they normally would. You might never see the real billing info. And that lack of transparency gives bad actors an advantage.
Why BNPL Is So Appealing to Fraudsters
There are a few key reasons why buy now pay later fraud is growing fast:
- Lower upfront risk for the scammer: Many BNPL services don't verify a full credit profile. A name, DOB, and phone number might be enough to open an account.
- Faster checkout flow: BNPL speeds up checkout and skips card entry. Fraudsters take advantage of that simplicity to reduce the chance of being flagged.
- Digital goods and fast shipping: Subscriptions, downloads, same-day shipping. These are high-risk targets. The scammer receives the item before fraud detection can catch up.
- Account takeover is easier: Once inside someone's BNPL account, a fraudster can rack up purchases quickly. The merchant gets hit when the real customer files a dispute.
- Harder to track: BNPL platforms may mask the actual payment method, making transaction data less useful to merchant-side detection systems.
Traditional Fraud Tools Miss BNPL Attacks
Most fraud filters were built for credit card orders. They flag risky cards, billing mismatches, and suspicious IP addresses. But when the BNPL provider sits in between you and the buyer, a lot of those signals are lost.
Here's why that matters:
- You may not receive the buyer's full contact details
- AVS (address verification) and CVV checks don't apply
- Orders may look "clean" because they passed the BNPL provider's internal screening, but that screening isn't always designed for your risk level
In short, the fraud filter gets less data, so the fraudster gets through more easily.
Real Targets: What Types of Stores Are Being Hit?
The most common victims of buy now pay later fraud include:
- Electronics sellers offering fast delivery or digital downloads
- Fashion and sneaker stores with limited inventory and resale value
- Subscription services where access is granted immediately
- Online marketplaces where seller identity checks are weak
- Gaming merchants selling gift cards, skins, or credits
Fraudsters follow convenience and speed. If your store prioritizes a fast checkout experience, it may already be on their radar.
Prevention Tactics for BNPL Fraud
You can't eliminate risk completely, but you can tighten the gaps that scammers look for:
- Analyze high-risk SKUs: Flag items frequently purchased with BNPL and review refund or chargeback patterns
- Use velocity rules: Watch for rapid repeat purchases from the same IP, device fingerprint, or shipping address
- Limit digital goods via BNPL: Consider restricting BNPL to physical items only or delaying delivery for digital access
- Request enhanced data: Some BNPL services offer merchant-level risk controls. Ask for full buyer details where possible
- Review disputes closely: Chargebacks from BNPL purchases may show up weeks later. Tag and study them separately from card-based fraud
Conclusion
Buy now pay later fraud isn't a theoretical risk. It's already hitting online stores hard. And the worst part? Many merchants don't see it coming. Because fraudsters hide behind the BNPL layer, your standard defenses often won't catch them until it's too late.
If you're offering BNPL, take a closer look at how it's impacting your dispute rate. Start treating these transactions like their own risk category, and make sure your chargeback tools are ready to deal with them.
FAQ: Buy Now Pay Later Fraud
What is the most common type of buy now pay later fraud?
The most common is identity fraud, using stolen or synthetic information to open a BNPL account. Once the account is created, the fraudster can place orders with no intention of paying the installments.
Are merchants liable for BNPL fraud?
Yes. While the BNPL provider may front the payment, merchants often absorb the loss when fraud occurs. Disputes filed by customers can result in chargebacks, and digital goods are especially hard to recover.
Why don't traditional fraud tools stop BNPL fraud?
Because BNPL providers process the payment, they mask key data like the buyer's card number or address. This limits the effectiveness of AVS, CVV, and behavioral analysis used by most fraud filters.
What kinds of products are most at risk?
Digital products, subscriptions, high-demand electronics, and limited-edition fashion items tend to be the top targets. These are easy to resell or access quickly before detection kicks in.
How can merchants reduce BNPL fraud?
Start by isolating BNPL transactions for separate review. Set rules for risky items, delay fulfillment if necessary, and work with your BNPL provider to access more customer data for better risk scoring.
Get Ahead of BNPL Fraud Before It Costs You
If you're only tracking card disputes, you're flying blind. Chargeblast lets merchants detect and respond to chargebacks tied to BNPL platforms before they become a major loss. Our system flags risky patterns across dispute sources so you can tighten your defenses and reduce chargeback rates, no matter how the scammer pays.
If your fraud tools aren't built for BNPL, it's time to upgrade your protection. Let's talk.
