As BNPL Use Increases, Fraud Risk Also Increases, Study Finds

Buy now, pay later services are growing in popularity, but many users are falling victim to fraud, according to a new study. (iStock)

According to new research from fraud prevention firm Callsign, the risk of fraud is on the rise amid increased use of buy now, pay later (BNPL) services.

The study found that nearly half (48%) of American adults take advantage of BNPL’s services, which allow consumers to split their purchases into smaller, interest-free payments. Some well-known BNPL providers include Afterpay, Affirm, Sezzle, and Klarna. The Callsign study also indicated that 54% of these users have more than one BNPL account and 23% have at least two.

Credit bureau TransUnion recently announced that up to 100 million adults have used a BNPL service in the past year. It became the second credit bureau – after Equifax – to include BNPL information during the process of calculating its credit score.

However, many users fall victim to fraud. According to the Callsign study, 14% said they had been the victim of fraud themselves, and a further 6% said they did not know if this was the case.

“The most common way users have been defrauded is by creating a fake BNPL account using their credentials, with 26% reporting it,” the study says. .

Read on to learn more about how BNPL users fall victim to fraud, as well as alternatives to such services as a personal loan. With Credible, for example, you can compare personal loan rates from multiple lenders without affecting your credit score.

How do BNPL users fall victim to fraud?

According to Callsign research, consumers can be victims of fraud by not changing their BNPL account passwords. Nearly half (45%) of consumers say they use the same email-password combination for multiple BNPL accounts.

22% said they had opened a fake BNPL account, which led to fraud, and 20% said their BNPL account had been hacked. Callsign research also noted that more than half (60%) of people said they would be more confident using a BNPL account if it was from their bank, rather than another provider. .

“More than half (55%) of the general population believe BNPL providers should be primarily responsible for protecting their customers from fraud, followed closely by the retailer connected to them (50%),” indicates the study.

But of users who were defrauded, about 43% said they should have been responsible for their own information. If you are hesitant to use BNPL’s services, consider taking out a personal loan instead, which can be a useful alternative if you need cash for major purchases. Visit Credible to compare multiple lenders at once and find the one with the best interest rate for you.

How to choose the best borrowing option for you

Those who have been victims of BNPL fraud face heightened anxiety about shopping online, the survey finds. In fact, 23% of those who suffered from fraud no longer use any BNPL service and 18% no longer use the merchant site on which they purchased the goods. But there are loan alternatives that might be more suitable for some consumers:

Credit card

For consumers in need of a revolving line of credit, a credit card may be a better alternative to BNPL for their purchases. Many credit cards offer cash back or other incentives for using them, such as paying zero interest for a certain period of time. However, the downside of credit cards is that they usually have high interest rates that could accumulate if borrowers are unable to pay off their balance each month.

You can explore the credit card options available to you by visiting Credible, where you can compare cards in minutes and choose the one that best suits your needs.

Personal loans

Personal loans give consumers access to credit at a lower interest rate than most credit cards, and they can be repaid in smaller monthly installments. The personal loan industry is also more regulated, which means lenders will take more steps to ensure consumers can pay for the loans they take out.

A downside to personal loans, however, is that they are not revolving lines of credit and may be more beneficial when paying off high-interest debt or major purchases, rather than day-to-day purchases. .

If you want to see your personal loan options, contact Credible to speak to a personal loan expert and get all your questions answered.

You have a financial question, but you don’t know who to contact? Email the Credible Money Expert at [email protected] and your question might be answered by Credible in our Money Expert column.

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