
KYC and AML: The Key to Secure BNPL Services in 2023

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Seems like Buy Now Pay Later (BNPL) services have taken the world by storm, with 360 million users worldwide in 2022, but the bitter truth is fraudsters have already taken the front-row seat.
BNPL services have helped consumers make purchases worth $100 billion, from pet foods to insurance premiums over the last year. That’s a big jump with no signs of slowing down in the coming years.
Banks and merchants are expanding BNPL services to boost B2B financing. With prices skyrocketing, the growth of BNPL would accelerate beyond the most bullish of projections making them a hub of opportunities for fraudsters.
BNPL is a payment model that lets customers buy an item and makes its purchase over several installments. Clients can get their parcels shipped immediately and they can pay off the amount over time.
Looking at the trends of BNPL services, it is anticipated that its market value will reach $680 billion globally by 2025. The same research estimates that US clients would be using BNPL services to buy those items that would exceed their budget or avoid using credit cards. Furthermore, BNPL payments in the US would reach $82 billion in the coming months.
The data suggests that 25% of eCommerce customers are using BNPL services in the UK, provided by approximately 20,000 merchants. Recent transactions were 5% of the eCommerce sector and were worth £6.4 billion.
Diving deep into the market makes it clear how popular these services are among youngsters. The Financial Conduct Authority (FCA) of the UK has found that 25% of BNPL users lie between the ages of 18 and 25 while 50% are between ages 25 and 36. And the astonishing thing is that 70% of users of BNPL servicers are females and 90% of the items purchased are related to fashion or footwear.
Looking at the size of how BNPL services are growing in this digital era, it is crucial to understand its vulnerability to fraud and how to keep oneself and other businesses safe and secure.
Suggested Read: Identity Theft Pushed to New Records with Buy-Now-Pay-Later Boom in Australia
As technology is advancing and businesses are looking to make their name, fraudsters are leaving no stone unturned to exploit them. The emergence of BNPL services has become a paradise for criminals to fulfil their malicious intent. There are several schemes that are used by fraudsters to target BNPL services which are as under:
Suggested Read: Buy Now Pay Later Service Openpay Warned for AML Violations
The surge in different kinds of BNPL fraud is not only causing havoc to customers but also merchants; here is how:
BNPL service providers are hunting for ways to curb the increasing number of fraud and the best strategy, in this case, is to stop bad actors, not the BNPL. But how to keep those fraudsters at bay? This is where Know Your Customer and Anti Money Laundering (KYC/AML) solutions came as a ray of hope. KYC & AML solutions not only protect firms from heinous crimes but also prevent them from paying hefty fines by making them compliant with global regulations. Moreover, robust KYC services offer customers a greater user experience and help build a positive brand image in the competitive market.
To detect BNPL fraud effectively, it is essential to identify subtle events and patterns formed over time. This is where Shufti Pro steps in, offering identity verification services to 230+ countries and territories, supporting 150+ languages, and authenticating customers in less than a second. Shufti Pro is globally trusted in eliminating synthetic ID fraud with an accuracy rate of 99+%.
Are you still confused about how KYC verification services curb fraud in the BNPL market?