2 PAYMENT METHOD PROFILES: BNPL
Characteristics
Debit/Credit Functionality BNPL providers essentially offer both debit and credit options for users. Some providers like Klarna and Affirm provide options for users to Pay in Full when a credit/debit card or personal checking account is linked to the BNPL account. 629 630 The more obvious credit functionality of BNPL is the option to pay off a balance over time. Users are presented with this choice, to either pay in full or over a series of payments, when they initiate a payment using a BNPL provider.
BillPay/Recurring Payments BNPL providers allow users to manage recurring subscriptions. 631 632 While not as common, some providers allow bills to be paid using their service. 633 634
Settlement Time Settlement times for merchants can range from 3-5 days depending on the BNPL provider. 635 636 637
Authorization BNPL providers perform soft credit checks when a user is making a transaction to authorize their usage. Once the BNPL provider authorizes the transaction, the merchant receives the full payment from the BNPL provider, with a slight delay depending on the provider’s settlement time. 638 Fraud/Authentication Process A lack of hard credit checks leave BNPL vulnerable to fraud due to less information required to apply for loans through BNPL. 639 Fraudsters have also been using synthetic identities to make purchases with no intention of repayment due to lack of hard credit checks. 640 According to an ACI Press Release in October 2024, synthetic identity fraud saw a 26% growth in H1 2024 alongside a 237% growth in BNPL global transactions. 641 Other common examples include account takeover, first-party fraud, and friendly fraud. 642
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