With the recent growth spurt within the BNPL sector, increasing by 20% last year in the UK alone –concerns are rising over possible fraud within the industry. *PYMNTS

At PayItMonthly, we champion transparent and secure flexible payments, so we've created this comprehensive guide to help you recognise and avoid these scams.

To best avoid fraud, it helps to understand the objectives and psychology of scamming.

 

Understanding the Fraud's Mindset:

Scammers thrive on deception and urgency. They often prey on emotions like fear, greed, or desperation. They create scenarios that seem plausible, often using sophisticated techniques to mimic legitimate businesses or authorities. Understanding their tactics is the first step in protecting yourself.

 

Fraud to look at for as a BNPL Consumer:

Phishing Scams:

How it works:

• Fraudsters send fake emails, texts, or social media messages that appear to be from legitimate BNPL providers.
• These messages often contain links to fake websites that steal your login credentials or payment information.
• They may claim there's a problem with your account, a missed payment, or a special offer.

Vulnerability: Users may be tricked into providing sensitive information, leading to account takeovers or financial loss.

How to avoid: Never click on links in suspicious emails, texts or WhatsApp messages Contact the organisation directly through a known and trusted channel to verify any requests. PayItMonthly will never ask for your full password via email or phone.

 

Smishing and Vishing:

How It works:

• A variation of Phishing using SMS messages (smishing) or phone calls (vishing).
• They often use similar tactics to traditional phishing, trying to create a sense of urgency or fear.

Vulnerability: Users may be tricked into providing sensitive information, leading to account takeovers or financial loss.

How to avoid: Be sceptical of unsolicited messages and calls. Verify the sender's identity independently.

 

Fake BNPL Offers:

How it works:

• Fraudsters may advertise fake BNPL deals or services, often through social media or online ads.
• They may ask for upfront fees or personal information before providing the promised financing.
• In reality, there's no legitimate BNPL service, and the scammers simply steal your money or data.

Vulnerability: Users seeking convenient financing may fall for these deceptive offers.

How to avoid: Research the legitimacy of the deal/company that is being offered –if it’s too good to be true, it often is.

 

Merchant Scams:

How it works:

• Fraudulent online merchants may offer BNPL as a payment option to appear legitimate.

After you make a purchase, they may:

• Fail to deliver the goods.
• Send counterfeit or low-quality products.
• Disappear without a trace.

Vulnerability: Users may assume that BNPL provides added security, but it doesn't protect them from fraudulent merchants.

How to avoid: Although the BNPL service may be a legitimate company, that doesn't authenticate the business offering it. Make sure to check the merchant too!

 

Account Takeover Scams:

How it works:

• Fraudsters gain access to your BNPL account through stolen credentials (e.g. from data breaches).
• They then make unauthorized purchases, change your account details, or steal your stored payment information.

Vulnerability: Users with weak passwords or those who reuse passwords across multiple accounts are at higher risk.

How to avoid: Don’t repeat your passwords, regularly changing them and making sure they are secure (for example in a password manager).

 

Upfront Fees:

How it works:

Fraudsters will demand suspicious of requests for things such as:

• "Processing fees"
• "Administration charges"
• "Guarantee deposits"

before you receive the financing.

Vulnerability: Fraudsters prey on the user's immediate need for funds. They create a sense of urgency, making the victim believe that the upfront fee is a small price to pay for the "guaranteed" financing, especially when in a financially vulnerable state.

How to avoid: Ask detailed questions about all costs involved and be wary of any significant upfront payments.

 

High-Pressure Tactics:

• Fraudsters often pressure you to make quick decisions, claiming limited time offers or imminent deal expirations.
• They want to prevent you from thinking clearly and researching.

Vulnerability: Fraudsters use time-sensitive offers to trigger FOMO, leading victims to bypass their critical thinking and act impulsively. This is especially potent in online environments where deals change rapidly.

How to avoid it: Never rush financial decisions. Take your time, research the lender, and compare offers.

 

Requests for Unusual Payment Methods:

• A "lender" (fraudster) will request you to pay via wire transfer, gift card, cryptocurrency, or cash.
• These methods are difficult to trace, making them ideal for fraudsters. Reputable lenders offer secure and transparent payment options.

Vulnerability: These payment methods offer near-complete anonymity and are often irreversible. Once the payment is sent, it's virtually impossible to recover the funds, leaving the victim with no recourse.

How to avoid it: Be wary of any unusual payment requests and stick to established payment methods.

 

Phantom Debt Collection:

• Fraudsters may contact you claiming you owe a debt you don't recognise.
• They might threaten legal action or damage to your credit score.

Vulnerability: Fraudsters use threats of legal action and credit score damage to intimidate victims into paying. Many people are afraid of legal consequences and don't want their credit to be ruined, leading them to pay without verifying the debt.

How to avoid: Request written verification of the debt. Check your credit report to see if the debt exists. Don't be pressured into paying a debt you don't recognise.

 

Protect Yourself From Fraud: A Proactive Approach

Be Proactive, Not Reactive: Don't wait for scams to come to you. Educate yourself about the latest scams and share this information with family and friends.

Monitor your accounts: Regularly review your BNPL transactions and report any suspicious activity.

Question Everything: Be sceptical of unsolicited offers, requests, or communications, especially those related to finances.

Shop with reputable merchants: Only buy from trusted online retailers.

Verify Independently: If you receive a communication claiming to be from a BNPL company, contact them directly through a known and trusted channel (e.g., their official website or phone number) to verify the communication's legitimacy.

Protect Your Information: Be extremely cautious about sharing personal or financial information online or over the phone.

Use Strong Passwords: Use unique, strong passwords for all your online accounts.

Keep Software Updated: Ensure your computer and mobile devices have up-to-date antivirus and anti-malware software.

Be wary of phishing: Never click on links in suspicious emails or texts.

Report Suspicious Activity: If you suspect you've encountered a scam, report it to the relevant authorities, such as the Action Fraud or get advice via this government website. You can also report suspicious websites to the appropriate internet security organisations.

 

By being aware of these scams and taking precautions, you can minimize your risk when using BNPL services. At PayItMonthly, we're committed to providing secure and transparent financing solutions. We believe that informed customers are empowered customers. If you have any questions or concerns about financing, please don't hesitate to contact us. We're here to help you navigate the world of financing safely and confidently.

 

To understand how fraud effects businesses check out our upcoming blog: Protecting Yourself from Fraud: A Guide for Providers.

Read more  PayItMonthly articles here.