The hidden risks of buy now, pay later

Steven

The hidden risks of buy now, pay later

Summary

Buy now, pay later (BNPL) has become a mainstream checkout option thanks to providers such as Klarna and Affirm. It offers customers instant, often interest-free instalments with light credit checks and gives merchants a competitive edge at point of sale. But as BNPL is embedded into commerce stacks, a cluster of hidden risks has emerged: fragmented data flows that hinder visibility, heightened fraud and identity threats, fragile integrations and infrastructure, escalating regulatory and compliance obligations, and damage to customer experience when things go wrong. The article outlines these risks and gives CIOs five priority areas to shore up systems and controls.

Key Points

  • BNPL market growth is large and accelerating — estimates project a rise from $560bn to $912bn by 2030, increasing exposure for merchants.
  • Fragmented data flows between retailers and BNPL providers create visibility gaps, leading to reconciliation failures and operational headaches.
  • BNPL attracts fraud and identity abuse (synthetic IDs, account takeovers, cross-provider misuse) because of fast, digital approval flows.
  • Integration complexity (API timeouts, phantom inventory, broken return loops) causes checkout failures, abandoned carts and lost sales during peaks.
  • Regulatory scrutiny is increasing; merchants are being asked to take on compliance tasks previously handled by providers (disclosures, audit trails, dispute handling).
  • Poor BNPL integration degrades customer experience via inconsistent eligibility decisions, delayed settlements and channel breaks.
  • CIOs should focus on five capability areas: stronger identity/fraud controls, resilient integrations, BNPL-specific data governance, compliance-ready architecture and incident playbooks.
  • Practical mitigations include multi-layered identity checks, behavioural analytics, API monitoring and redundant routing, full lifecycle data lineage and real-time audit trails.

Context and relevance

BNPL is shifting from a peripheral payment choice to an embedded finance standard across retail and e‑commerce. That makes the risks systemic: poor BNPL implementations can create financial discrepancies, regulatory exposure and reputational harm that ripple through operations, customer support and finance teams. For organisations modernising commerce stacks or considering multiple BNPL partners, the piece links risk to specific technical and governance failures and offers a pragmatic checklist for CIOs and payments teams. This sits within broader trends — tighter regulation of consumer credit, increased fraud sophistication (including AI-enabled attacks) and the need for real‑time, low‑latency commerce platforms.

Why should I read this

Short version: if your organisation offers BNPL or is thinking about it, this saves you from the ugly surprises — fraud losses, angry customers, regulator headaches and frantic manual fixes. Read it to see the five concrete areas IT must own so BNPL doesn’t blow up your checkout or balance sheet.

Author style

Punchy and practical. The author strips out theory and focuses on real operational pain points and clear CIO actions. If you run payments, commerce or risk, treat the recommendations as a must-do roadmap rather than optional reading.

Source

Source: https://www.techtarget.com/searchcio/feature/The-hidden-risks-of-buy-now-pay-later