BNPL and Other Alternative Payments Need Stronger Authentication

Socure - Alternative Payments - March 2022 - Discover how FIs and Fintechs use robust identity authentication to meet emerging cybersecurity challenges

Socure - Alternative Payments - March 2022 - Discover how FIs and Fintechs use robust identity authentication to meet emerging cybersecurity challenges

Consumers’ banking and payment preferences have swiftly become digital-first, with mobile apps and eCommerce channels quickly replacing in-person branches or retail stores for many customers.

These newfound preferences for online solutions also means more and more consumers are willing to experiment with emerging, alternative payment solutions such as buy now, pay later (BNPL) methods, cryptocurrencies and mobile wallets. For example, one September 2021 study found 31% of consumers had increased their FinTech app use since the start of the pandemic.60%: Portion of consumers who would prefer to authenticate using 2FA periodically for additional security

However, the rising usage of alternative payment tools has also led to a corresponding bump in fraud, with another report finding 80% of global cybersecurity leaders now consider attacks like ransomware to be a top threat to public safety. Account takeover (ATO) attempts, phishing and related scams are also growing more prolific on BNPL apps, for that matter, with fraudsters also targeting cryptocurrency platforms at a greater scale.

In the latest “Alternative Payments Tracker®,” PYMNTS analyzes the rising concerns surrounding alternative payment methods’ security and data privacy, as well as how implementing robust, innovative identity authentication measures can help payment providers and merchants keep such methods protected.

Developments From Around the World of Alternative Payments

Installment payment providers are reporting rapid growth and adoption in the use of their solutions, with BNPL provider Klarna recently announcing a 141% increase in United States sales between the 2020 and the 2021 Black Friday and Cyber Monday retail period. However, BNPL-focused fraud has also inched upwards, with a 66% rise in BNPL targeted fraud between 2020 and 2021. This includes account takeover attacks (ATO) by bad actors, which use previously stolen credentials to pose as legitimate users of installment payment services. Warding against such attacks and other forms of credential stuffing should therefore be top of mind for merchants.47%: Share of individuals who cited data security worries as the reason why they would not switch their primary banks to digital-only entities

Consumers, however, are placing a rising amount of trust in mobile payment or FinTech apps even as fraud concerns spike, especially when it comes to trusting such apps with their online security. One recent study found 73% of consumers surveyed believed their data is private and kept secure on these apps, for example — though notably, many consumers also lack clarity surrounding what information FinTech apps can share. Just 24% of individuals were aware that FinTech apps could share their private data with third-party entities, for example. Narrowing this consumer awareness gap could be vital in keeping these customers’ trust.

For more on these and other stories, visit the Tracker’s News and Trends.

CASETiFY: Why Identity Verification and Fraud Protection Are Key to Alternative Payments’ Growth

The global health crisis inspired a rising number of consumers to try out alternative new payment methods, including mobile wallets or budget-friendly installment payment tools. Supporting such solutions also offers merchants themselves a key opportunity to increase consumer engagement, Mike Jia, growth director for eCommerce platform CASETiFY, explained in a recent PYMNTS interview. As fraudsters follow consumers’ lead, however, supporting such payment methods also requires merchants to be able to differentiate between bad actors and legitimate consumers easily and quickly.

To learn more about why robust identity verification is essential for retailers to be able to support alternative payments and for the use of such solutions to continue growing, visit the Tracker’s Feature Story.73%: Share of consumers who want to select the identity authentication methods they use

How Robust Identity Authentication Can Help FinTechs Meet Growing Cybersecurity Challenges

BNPL payment solutions have swiftly become one of the more popular forms of alternative payments, with mobile wallet provider PayPal alone reporting a 400% year-over-year jump in the use of its own BNPL tool between 2020 and 2021 Black Friday and Cyber Monday sales. However, this has also led to a corresponding jump in BNPL focused fraud. It is therefore imperative for merchants wishing to support BNPL and other alternative payment methods to be able to easily distinguish between legitimate consumers and fraudsters.

To learn more about the security weaknesses plaguing alternative payments and how robust identity authentication can help, visit the Tracker’s PYMNTS Intelligence.

About the Tracker

The “Alternative Payments Tracker®,” done in collaboration with Socure, is your go-to monthly resource for updates on trends and changes in alternative payment methods.