Upfront, let’s stipulate that Buy Now, Pay Later lending is a good consumer credit option for some, but also agree that the fintech “no interest, no interchange” mode is not as free as it suggests, nor is the credit quality bank-grade. With the holiday season ahead, we will likely see increased fraud, not just increased credit risk.
In the mainstream BNPL model, there is no question about the incremental risk of ignoring established credit scores and embracing thin credit files. Today, the focus is on fraud. Bank card issuers are sensitive to fraud, particularly as they soften lending standards and card-not-present (CNP) transactions grow. With lighter credit standards, BNPL experiences higher risk,
