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Importance of Identity Verification for Buy Now Pay Later Providers

Naomi Cook | June 23, 2023

Edited by Hannah Locklear

Summary: Buy Now, Pay Later (BPNL) is like taking out a loan right there at the cashier. You get to take the item home without having paid for all of it. As a BNPL provider, it’s important to verify your customers’ identities in order to protect them and yourself. If you are struggling with debt as a result of BPNL, SoloSuit can help.

Buy Now, Pay Later (BPNL) offers are attractive, because you can have the item now and only pay in the future. What happens if you can’t pay for it – ever? Even worse, what happens if someone makes a purchase in your name, which throws you into debt?

One significant concern that arises with Buy Now, Pay Later (BNPL) offers is the potential accumulation of debt and the challenges it may pose for both customers and providers. While BNPL options offer the allure of deferred payments, there is a risk of customers falling into debt if they are unable to meet their repayment obligations.

BNPL options are not only attractive to customers, but also to criminals, who can see the gap for committing online fraud. To avoid this, it’s vital that the identities of all parties involved in a BNPL transaction are properly verified.

In fact, online verification of anyone’s details is valuable, especially if the person is a minor. Companies like Jumio provide a tool for identity verification for Online Minor Safety.

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BNPL recap in a nutshell.

If you want to buy an item, but can’t quite afford it, you have three options: don’t buy it, pay for it on credit, or take part in a Buy Now, Pay Later program. If you don’t want to rack up huge debt on your credit card, you are likely to go for the BNPL option.

Essentially, shopping on a BNPL offer is like taking out a loan right there at the cashier. You get to take the item home without having paid for all of it. A BPNL provider pays the retailer for the item and you agree to pay the provider back in installments over a certain time. Unlike other loans, BNPL offers a set fee, so no extra interest is accrued.

As a customer, what do I get out of a BNPL offer?

With BPNL, you get to take the item home, even if you can’t afford it right then. You know exactly how much you owe, right from the start. Buying on credit means high fees and growing interest, while BNPL charges one fee.

A BNPL service provider will do a less in-depth credit check, which means it is quicker to get the money.

What are the dangers of Buy Now, Pay Later?

It’s great to take something home and only pay for it in a week or month’s time, but not everything is necessarily so easy. With BNPL, if you default on a payment, you may be charged extra interest or even a late fee.

Then, there is the whole issue of debt. Because of the ease with which you can buy things, BNPL can encourage you to buy more than you can ever afford. You may need to go into overdraft to pay back the installments.

Neither of these is as potentially dangerous as the possibility of identity theft or phishing, which can result in you losing not only your identity, but a lot of money. Someone’s not going to steal your identity for fun – they want to use it. And they are most likely to do so to buy things, for which you will be responsible and will find yourself in a huge amount of debt.

Before you make use of any BNPL provider, do yourself a favor and make sure they do thorough identity verification checks and are compliant with the necessary regulations.

Why is identification validation important for a BNPL provider?

On a practical level, if you verify your customer’s identity and address, the likelihood of delivering goods to the wrong address is much less.

The online application processes associated with a lot of the BNPL services are attractive for online fraudsters. Their activities can include stealing credit card details or creating new accounts.

Keep your customers coming back, because they feel safe with your service, by doing solid identity checks. It keeps the customer secure and builds their trust in you and your service. That kind of reputation is also invaluable for attracting new customers.

Not only can online phishing result in a criminal stealing banking details, it can also result in complete identity theft. This has many more serious implications for the victim. The criminal will be able to make purchases, withdraw money and do just about anything online that is available to do. If you don’t protect your customers and yourself by verifying all identities, then you could open them up to this.

If a person’s banking or identity details are stolen, the criminal can potentially make many unauthorized purchases – which may never be paid, because the victim simply can’t afford them. This means that, as the BNPL provider, you will have paid the retailer for the goods and now sit having spent money you may never see again.

There are two regulations required of BNPL providers: Know Your Customer (KYC) and Anti-Money Launtering (AML). A surefire way to be non-compliant with these laws is to avoid verifying your customers’ identities.

The laws are in place to help ensure that the customers are not involved in illegal actions, such as financing terrorism, laundering dirty money, or fraudulent financial activities. If you haven’t confirmed your clients’ identities and they are guilty of one or other illegal activity, then you could be implicated.

Don’t fall into debt as a result of a BNPL loan

While BNPL options can be useful, there is also a risk of falling into serious debt when you miss your payments. In fact, 34 percent of consumers who used BNPL services fell behind on one or more payments, finding themselves struggling with debt.

If debt collectors are coming after you for debt, SoloSuit can help.

Whether you need to request a debt validation, respond to a debt lawsuit, or settle a debt before going to court, SoloSuit’s got you covered. For more info on how to settle a debt and move on with your life, check out this video:

Key takeaways

The bottom line is: as a BNPL provider, make sure you verify your customers’ identities, to protect them and yourself.

SoloSuit can help you deal with debt that occurred as a result of BNPL loans, credit cards, and more.

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