Synthetic fraud carries sizeable risk for BNPL providers

The buy now, pay later industry (BNPL) provides an innovation rail for alternative lending processes and real-time fund access, but it is also opening doors for advanced fraud techniques.  Synthetic fraud poses an especially dangerous risk, Featurespace founder Dave Excell tells Bank Automation News in this episode of “The Buzz” podcast. Featurespace uses machine learning and behavioral analysis to facilitate anti-fraud measures for financial service companies. BNPL providers see most fraud occur at the onboarding, where identity and documentation must be provided in a process similar to opening a bank or credit card account. Cybercriminals create fake accounts using falsified information, which is then used to access products and services, Excell explains. “We've seen significant growth, especially in the U.S. market, around synthetic fraud,” Excell tells BAN. “So, where you're using stolen identity information mixed with fake information, almost like a synthetic person, which will clear certain validation checks.” Listen to glean insights on regulatory compliance and how BNPL providers can manage and mitigate fraud.