The Hidden Risks in BNPL

Buy now, pay later is gaining in popularity—but that fast uptake may cause headaches down the road.

FICO’s announcement earlier this summer that buy now, pay later (BNPL) loans will soon affect credit scores for millions of Americans signals the credit industry’s scramble to catch up with BNPL reality.

Yet as partnerships like DoorDash and Klarna expand “eat now, pay later” services into everyday essentials, a critical question emerges: will traditional credit scoring, even enhanced for BNPL, capture the real-time financial stress that these services often mask?

As consumers increasingly turn to BNPL for everyday essentials like groceries and food delivery, it becomes more important to monitor real-time bank-account activity. Unlike static credit reports, bank-account intelligence has uncovered concerning trends. Many consumers appear to be reaching the limits of their available credit and utilizing BNPL as an additional financial tool—potentially creating a delayed financial impact that isn’t immediately apparent.

While BNPL services report high customer satisfaction rates for their ease of use, data analysis suggests the real financial impact may not be felt until repayment requires more financial juggling from already stretched consumers. This creates a “financial cliff” that consumers approach gradually but may face suddenly when multiple payment obligations come due simultaneously.

While FICO’s new scoring model promises to help consumers who, as FICO says, “pay back their BNPL loans in a timely way,” it doesn’t address the fundamental timing gap in credit assessment.

Current FICO scores remain elevated at an average of 715 following pandemic-era stimulus measures, and even the enhanced model will still be backward-looking. Bank-account data, however, reveal financial stress in real time—often 90 days before it impacts any credit score.

Multiple Obligations

This expansion of BNPL beyond retail is accelerating rapidly. Beyond food delivery, we’re now seeing “care now, pay later” options proliferating in health care, allowing patients to finance everything from routine medical procedures to emergency care. While this addresses a genuine need for health-care affordability, it also potentially compounds financial vulnerability for consumers who are already juggling multiple payment obligations.

While FICO’s enhanced scoring model represents progress, it inherently suffers the same limitation as traditional credit assessment: it measures past performance rather than current financial capacity. When consumers begin juggling multiple BNPL obligations across retail, food delivery, and health care (an activity also known as loan stacking), the cumulative impact may not surface in credit scores until consumers are already in distress.

Bank-account intelligence reveals these patterns as they develop, not months later. Indeed, bank-account analysis reveals subtle warning signs that traditional credit checks typically miss.

Transaction patterns showing frequent small loans across multiple BNPL services can indicate financial strain before it impacts credit scores. Similarly, increasing overreliance on BNPL for essentials rather than discretionary purchases often precedes more serious financial difficulties.

The expansion of BNPL into food delivery and health care marks a notable shift in behavior. When consumers begin financing immediate everyday needs like meals and medical care, it signals a potential breakdown in personal financial management. Our analysis shows that when consumers begin using credit instruments for everyday essentials, this often correlates with a rise in financial instability within the following 90-day period. This highlights an early warning sign of deeper financial distress.

For consumers, the convenience of splitting a $35 takeout order into four payments might seem practical in the moment, but without visibility into their broader financial situation, they may be unknowingly setting themselves up for future payment challenges. The ease of approval and frictionless user experience can mask the cumulative impact of multiple small payment obligations across retail, food, and health-care platforms.

For lenders and service providers, having a comprehensive financial perspective enables more informed decisions that better serve both their business interests and their customers. By incorporating bank-account intelligence into the assessment process, they can identify which consumers are using BNPL responsibly versus those who may be overextending themselves across multiple services.

Decisive Advantage

An upcoming fraud-monitoring rule from NACHA will likely enhance scrutiny of payment methods, including those used with BNPL services. This evolution of regulatory oversight reflects the growing integration of these payment options into everyday transactions. Organizations that implement more comprehensive assessment methods will be better positioned for these regulatory changes.

As the credit-scoring industry adapts to BNPL’s reality, forward-thinking lenders recognize that even enhanced credit scores won’t eliminate the need for real-time financial intelligence.

The proliferation of BNPL across retail, food delivery, and health care creates complex debt webs that traditional scoring struggles to capture in real time.

Organizations that combine traditional credit assessment with comprehensive bank-account intelligence will gain a decisive advantage in this evolving landscape. They’ll identify financial stress before it cascades into defaults, make more informed

lending decisions, and ultimately help consumers navigate the convenience of BNPL without falling off the hidden financial cliff that results from overextension across multiple platforms.

As BNPL services continue to proliferate across every aspect of consumer spending, the financial-services industry must evolve how we assess creditworthiness. As consumers using BNPL services face repayment obligations that can affect their overall financial capacity, looking beyond traditional credit scores to include bank-account and payment intelligence can provide critical context for more informed lending decisions and, ultimately, better financial outcomes for consumers.

Organizations that leverage comprehensive bank-account intelligence will gain a competitive advantage by making better-informed decisions while helping consumers avoid the hidden financial cliff that can result from overreliance on multiple credit instruments.

—John Gordon is chief executive of ValidiFi.