Executive Summary
Buy now pay later (BNPL) is now a mainstream payment option across ecommerce, but it changes how fraud shows up and where merchants get hurt. BNPL can reduce traditional card chargeback exposure in some flows, yet it can also create new pathways for identity fraud, account abuse, refund complexity, and post-purchase exploitation.
This refresh explains how BNPL fraud works, why BNPL can become a “path of least resistance,” and what ecommerce teams can do to reduce exposure without turning BNPL into a conversion tax.
For a definitional overview, see the NoFraud glossary entry on Buy Now Pay Later (BNPL) fraud.
What BNPL Changes Compared to Card Payments
BNPL introduces a second decision-maker into checkout: the BNPL provider approves the financing while the merchant still controls fulfillment, customer experience, and refund operations. That split can create blind spots where risk signals are fragmented.
BNPL also tends to reduce checkout friction. Reduced friction is good for conversion, but it can be attractive to bad actors who test merchants for weak points and then scale.
A practical way to think about it is “two funnels” instead of one:
- The merchant’s checkout, fulfillment, and returns funnel
- The BNPL provider’s underwriting and repayment funnel
If you want a deeper framing on where fraud appears “now vs later” in installment transactions, read Is Fraud Now or Later in BNPL Transactions.
The Most Common BNPL Fraud and Abuse Patterns
Identity-based BNPL fraud
BNPL fraud commonly starts with identity manipulation, including stolen identity details, synthetic identities, or account takeover pathways used to pass BNPL onboarding and place orders.
This is one reason regulators and policy bodies have increased attention on BNPL consumer protections and the treatment of BNPL under existing credit frameworks, including the CFPB’s BNPL work and interpretations in the U.S. (see the CFPB newsroom post on BNPL research and protections in CFPB research on BNPL use and protections).
BNPL whitelisting and trust seeding
A recurring merchant-loss pattern happens when teams implicitly trust BNPL and auto-approve it. Fraudsters use BNPL to “seed trust” with a couple of low-value orders, then switch to stolen card credentials or other risky payment methods on the same account.
This is a close cousin of broader trust exploitation patterns discussed in fraud operations, and it is one reason many teams treat “payment method change after approval” as a meaningful risk event.
Refund and returns complexity
BNPL adds complexity to refunds because there are now multiple parties and ledgers involved. Abuse can appear as:
- Refund pressure while the item is in transit
- Partial refund demands
- Returns manipulation paired with disputes
If you’re seeing more refund-driven loss, connect this topic with refund abuse and return manipulation tactics like fake tracking ID (FTID).
Post-purchase exploitation and “INR” claims
Many BNPL losses show up after delivery in the form of disputes, “item not received” claims, or reroute-style interception patterns.
If you’re dealing with fulfillment-stage attacks, review Item Not Received (INR) and the operational playbook in Reroute Fraud: The Growing Ecommerce Problem.
What Merchants Get Wrong About BNPL “No Liability”
Some BNPL programs market reduced merchant liability for certain dispute types. Merchants often interpret that as “BNPL orders are safe,” then loosen controls. The outcome is predictable: fraudsters gravitate to merchants that treat BNPL as an auto-approve lane.
The more durable approach is not “BNPL is safe” or “BNPL is risky,” but “BNPL requires the same rigor as any payment method, plus extra attention to identity and post-purchase outcomes.”
For broader guidance on modern ecommerce fraud controls (including post-purchase patterns), see ecommerce Fraud Protection Best Practices.
BNPL Risk Controls That Actually Reduce Losses
Treat BNPL as a risk signal, not a trust signal
BNPL usage should feed your risk model alongside device behavior, account history, velocity, SKU risk, and delivery risk. BNPL is not automatically bad, but it should not be automatically trusted.
Re-screen risk when key attributes change
If your workflow allows edits after checkout (address changes, pickup holds, payment method changes), treat those as new risk events. This is especially important when BNPL is used to establish trust and then the account behavior changes.
Tighten controls for high-resale SKUs and high-AOV baskets
Fraudsters target easily fenced items. Apply step-up verification for risky combinations (new account plus high AOV plus expedited shipping plus high resale category).
Close the loop with post-purchase intelligence
The fastest way to reduce BNPL abuse is to connect checkout decisions to downstream outcomes: returns, refunds, disputes, delivery anomalies, and repeated behavior across identities.
That is exactly why the market is moving toward unified pre- and post-purchase protection. If you want the NoFraud position on that trajectory, see NoFraud + Yofi AI: the unified fraud and abuse prevention platform.
BNPL vs Card Fraud: What’s Different and What’s the Same
BNPL does not eliminate fraud. It changes the shape of fraud:
- Card fraud often manifests as chargebacks and issuer disputes
- BNPL fraud often manifests as identity risk, abuse of trust, and post-purchase manipulation
For the full comparison and decision framework, see the companion page: BNPL Fraud vs Card Fraud: Key Differences for Ecommerce Merchants.
Frequently Asked Questions
What is BNPL fraud?
BNPL fraud is fraud or abuse that exploits installment-based payment options, often through identity manipulation, account abuse, or post-purchase exploitation that increases merchant loss risk.
Does BNPL reduce chargebacks for merchants?
BNPL can reduce certain traditional card chargeback pathways depending on the provider and flow, but it does not remove merchant loss risk. Losses may shift into refunds, returns abuse, fulfillment-stage manipulation, or contract-based liability conditions.
Why do fraudsters like BNPL?
Fraudsters like BNPL when it creates a lower-friction path to acquiring goods, when merchants auto-approve BNPL orders, or when fragmented visibility between merchant and BNPL provider creates blind spots.
How can merchants prevent BNPL fraud without hurting conversion?
The most effective approach is layered controls: risk-based step-up verification for high-risk profiles, re-screening after key changes, SKU-aware policies for high resale goods, and post-purchase intelligence to identify repeat abusers.
Summary
BNPL is here to stay, and it can be a meaningful growth lever. But it also introduces fraud and abuse patterns that merchants will miss if they treat BNPL as a “safe lane.” The merchants that win with BNPL apply modern, behavior-aware controls and connect checkout screening to post-purchase outcomes so repeat abuse gets stopped without penalizing good customers.
