“BNPLs don’t have checks and balances on customers”- True or False?
Please refer to my article “There’s no hardship or protections with BNPL if you get into trouble” where I talked about the ‘BNPL incentive’. BNPL companies need customers to be able to pay off their debt. Which is why your spending limit on a product like Afterpay starts low, and you need to make your first instalment payment upfront.
Many BNPL providers are using customer risk assessment technology and design principles. They do this because they want customers that won’t default and stop using the service (apologies for sounding like a broken record!).
For example, all purchases using Afterpay are assessed using advanced fraud and real-time repayment capability checks at the time of each and every order. Unlike for credit cards, which make one-off decisions to approve customers with large spending limits, often committing them to a lifetime of debt.
Does this work? Afterpay have reported having significantly lower credit losses and impairment charges, compared to traditional credit and other BNPL competitors. The overwhelming majority of Afterpay transactions are from repeat customers who have shown positive repayment behaviour.
On top of these measures, providers including Zip also reserve the rights to conduct traditional credit checks on customers as part of their assessment process. You can find out more on their website here.