Gen Z at highest risk from BNPL identity fraud  

With high inflation and the cost-of-living crisis, more and more people are being pushed towards increased borrowing.

According to the GBG State of Digital Identity Report less than a fifth (17%) of people in the UK opening a BNPL were asked to take an affordability check compared to just over a third (36%) of people opening a credit card or loan.

As a largely unregulated industry, BNPL lenders currently don’t have to undertake affordability checks, but the FCA plans to change this by strengthening the regulation of interest-free BNPL credit agreements. The FCA has also confirmed that lenders will be required to carry out affordability checks in the future but the legislation for this won’t be in force until after a public consultation planned for 2023. 

GBG’s independent research also revealed that 81% of UK young adults – aged between 18-24 – signed up to a new online account in the last 12 months compared to 48% of people aged 55+ and 67% of people overall. When looking at BNPL specifically:   

The research also uncovered that 19% of 18-to-24-year-olds have opened BNPL accounts compared to 6% of people aged 55+ and 14% of people overall, and 17% of females have opened up BNPL accounts compared to 8% of males and 14% of people overall.

Against this backdrop, almost a fifth (18%) of 18-24-year-olds in the UK said they have personally been a victim of identity fraud in the last 12 months compared to just 3% of adults aged 55 and over.  

Gus Tomlinson, chief product officer, EMEA at GBG, said: “Young adults are by far the biggest consumers of buy-now-pay-later loans and potentially the most vulnerable. Responsible BNPL lenders and retailers shouldn’t wait to introduce affordability checks. Affordability checks are available right now and not only reduce the financial cost on lenders and retailers of late and non-payment, but they also protect consumers from overextending themselves and falling further into debt.”

Tomlinson stressed prevalence of BNPL scams, stating: “Young adults are also being targeted by identity fraudsters at an alarming rate. Our research found that 850,000 18-24-year-olds have been a victim of identity fraud and many are falling victim to misleading BNPL promotions and fraudulent social media scams. It is essential that steps are taken now to strengthen fraud defences to verify that a customer is who they say they are, especially if they are a young person, and not a fraudster in disguise.”