Executive Summary
BNPL (buy now, pay later) introduces a simple question with a complicated answer: does fraud happen “now” at checkout, or “later” after the order ships?
In practice, BNPL risk shows up in both places:
- “Now” fraud typically looks like stolen identity, account takeover, synthetic identity, or classic card-not-present behavior that slips through checkout.
- “Later” fraud often looks like post-purchase abuse, including chargebacks, refund abuse, return fraud, item-not-received claims, and policy manipulation.
Regulators and central banks consistently emphasize that BNPL changes consumer behavior and delinquency dynamics, and often sits outside traditional credit reporting and dispute expectations, which changes how risk surfaces for merchants and consumers. See the CFPB’s market work on BNPL and consumer impacts at CFPB BNPL market trends and consumer impacts report (PDF) and the BIS cross-country analysis at BIS Quarterly Review: buy now, pay later.
What BNPL Is and How BNPL Fraud Timing Is Different
BNPL lets a customer split a purchase into installments. Depending on the provider and merchant setup, approval can be instant and may rely on lightweight checks compared with traditional credit products.
From a risk perspective, BNPL changes two things:
- The customer can complete checkout faster, which can compress the “now” decision window.
- Post-purchase resolution becomes more complex (returns, refunds, disputes), which increases “later” abuse opportunities if merchant workflows are not designed for BNPL.
The Federal Reserve has documented how BNPL has expanded from online into broader retail contexts and how consumers use it, which is relevant because broader adoption increases opportunities for misuse. See Federal Reserve FEDS Notes on BNPL use.
Where Fraud Happens “Now” in BNPL
1. Account takeover and identity misuse at checkout
Fraudsters may use compromised customer accounts to place BNPL orders because they can look like a legitimate repeat buyer and may pass basic device and identity checks.
If you’re reviewing checkout design changes alongside BNPL, compare friction at each stage in Cart Abandonment vs Checkout Abandonment.
2. Synthetic identities and low-signal approvals
Some BNPL flows rely on limited data or fast approvals. When identity signals are weak, synthetic identities and mule behavior can move through quickly, especially during peak traffic periods.
3. High-velocity testing and promo exploitation
BNPL is frequently paired with promotions and high-AOV carts. Fraudsters may use BNPL to amplify the value of a successful attempt, particularly when merchants lack strong pre-purchase risk controls.
Where BNPL Fraud Happens “Later” in BNPL
BNPL often increases post-purchase complexity. That complexity is exactly where a large share of merchant loss shows up.
1. Friendly fraud and chargebacks
Customers can dispute transactions for confusion, buyer’s remorse, or dissatisfaction, especially when the descriptor, BNPL repayment schedule, and merchant support experience are misaligned.
Start with Chargebacks 101: What They Are and Why They Matter and the operational response model in Take Charge of Chargebacks.
For the dispute framework that drives outcomes, see Visa dispute management.
2. Refund abuse and return fraud
BNPL introduces a common abuse pattern: customers seek refunds while the BNPL plan is still active, or exploit return timelines to extract value.
If you’re building a playbook, connect this with Return policy abuse and The most popular playbooks to stop return fraudsters. For definitions used in ops policies, reference Refund abuse and Return fraud.
Retail research and policy discussions consistently highlight returns fraud and abuse as a growing loss area, which is why “later” risk is often the merchant’s largest exposure in BNPL-heavy categories. See National Retail Federation research hub.
3. Delivery disputes and reroute manipulation
BNPL orders are an attractive target for delivery manipulation because the buyer may claim non-receipt while still benefiting from the goods.
See the mechanics in The reroute fraud problem and the definition in Item Not Received (INR).
4. Policy gaming across multiple orders
BNPL can make repeat abuse easier: multiple small installment plans can obscure spend, and policy loopholes can be exploited repeatedly unless merchants connect identity and post-purchase outcomes over time.
The Merchant Reality: BNPL Risk Is a Lifecycle Problem
The most important takeaway is that BNPL risk is not just a checkout problem.
If your fraud stack is optimized only for “now,” you may still lose margin later through:
- refunds and return abuse
- repeat disputers
- delivery disputes
- customer support manipulation
This is why merchants increasingly need connected decisioning across checkout and post-purchase workflows. The unified approach is described in NoFraud + Yofi AI: the first unified fraud and abuse prevention platform.
How to Reduce BNPL Fraud Without Killing Conversion
1. Optimize approvals and minimize false declines
BNPL shoppers are often high-intent. A false decline can permanently lose the customer. For the economics, see The value of false declines.
2. Use identity and behavior signals, not just payment signals
BNPL isn’t just “a new payment method.” It changes who buys, how they buy, and how disputes happen. That means you need stronger identity and behavioral context at decision time.
3. Treat post-purchase events as risk signals for BNPL fraud
Track and learn from:
- refund request patterns
- serial returns
- repeat INR claims
- dispute history
- support escalation behaviors
This is how you stop “later” fraud from becoming a permanent margin tax.
4. Align BNPL workflows with support and returns operations
BNPL disputes often arise from confusion. Reduce disputes by making:
- return/refund timelines explicit
- refund status transparent
- customer communications fast and consistent
Regulatory Context Merchants Should Know
BNPL is moving toward tighter oversight in multiple markets. For example, the UK Financial Conduct Authority has published preparation guidance for regulating deferred payment credit (often called BNPL) starting in 2026. See FCA: regulating buy now, pay later.
In the U.S., the CFPB continues to publish BNPL market monitoring and data spotlights that merchants should understand because they shape consumer expectations and dispute behavior. See CFPB BNPL market report (PDF) and CFPB BNPL market spotlight (PDF).
Frequently Asked Questions about BNPL Fraud
Does BNPL fraud happen at checkout or after purchase?
Both. Checkout fraud includes identity misuse and account takeover, while post-purchase fraud includes chargebacks, refund abuse, return fraud, and delivery disputes.
Why can BNPL increase chargebacks and disputes?
BNPL can increase confusion about billing descriptors, repayment schedules, and refunds. When customers feel unresolved, they may file disputes rather than contacting the merchant.
How can merchants reduce BNPL-related return and refund abuse?
Treat post-purchase events as risk signals, monitor repeat behavior, and align return and refund workflows with clear customer communication.
Is BNPL safer than credit cards for merchants?
Not inherently. BNPL changes where risk surfaces and can shift loss into post-purchase workflows if merchants only optimize for checkout decisions.
BNPL Fraud Summary
BNPL fraud is not “now or later.” It is both.
Merchants that only defend checkout may still lose significant margin after the order ships. The best BNPL strategy is lifecycle coverage: approve good buyers fast, block fraud early, and use post-purchase outcomes to stop repeat abuse before it becomes systemic.
