The Ethics of Post Payment

There’s a different between “Can we offer post payment?” from a feasibility/value standpoint and “Should we offer post payment?” from an ethical standpoint. This blog scratches the surface on both.

💸 Profit
Post Payment, including buying with a credit card, is profitable for businesses. And it is profitable for businesses that offer post payment as a service to other businesses (Klarna, Riverty etc.). It is profitable because of:
– Higher conversion rates (people buy more often)
– Bigger basket sizes (people buy more per time)
– Reminder fees
– Interest rates
And probably some other things as well

The risk appetite deals with the question: “ Can we offer post payment?”. It’s all about the risk appetite. Usually, not every customer is offered post payment. The business does one or several risk assessments. Most common are the credit risk (do we think the person has the money, but also is the person already in debt collection) and fraud risk (what’s the chance and impact for this order or customer of deliberately not paying or worse). Combining the risk assessments with a risk appetite gives you a means to determine how much post payment is offered to who.

👍👎 Ethics
The ethical part deals with the question: “Should we offer post payment?” Here are some ethical considerations:
– 🗓️ Post payment separates the date/time of buying from the date/time of paying. And by doing this, customers have and feel freedom. It can be considered as their fundamental right to choose when they order and when they pay. 
– 👮‍♀️ Post Payment is legal. It is up to the market on how this exactly works, how post payment is offered to whom and how much it costs. More and more countries have legislation and rules for post payment and the processes behind it (e.g. only give 1 reminder fee for all outstanding orders instead of a reminder fee per order), limiting what’s legal or not.
– 🐛 Post payment opens up a whole can of worms concerning fraud, the simplest one is just deliberately ordering something and not paying. Therefore there is more fraud in the world with post payment than without.
– 🌍 Post payment enables us to consume more than we need. This has great impact on the environment and how we treat our planetary resources
– 🎄 Post Payment offers a way for poor people to buy something for their kids for Christmas or Sinterklaas. But they also know they cannot afford it, deliberately putting them in debt (even further).
– 💉 Shopping can be an addiction and post payment offers a more easy way to not feel the “pain” immediately 
– ❓ What other ethical considerations do you see?

🤔 My opinion
I’m concerned that organisations know these ethical considerations, but that with every chance or adjustment in the system, technology or just the risk appetite, they aren’t actively answering the question if they should. The ethical discussion should always be part of any change or experiment with post payment and the organisation should make a conscious decision not just on the business case but also on what other impact it might have on their customers.

The simple truth about scaling fraud management

Fraud detection doesn’t scale, fraud prevention does. It’s not complex, so let’s make it simple.


Risk in general and fraud risk as well, consists of 2 parts and is usually represented with a simple formula:

Risk = Chance x Impact

Fraud detection is all about reducing the impact of fraud. That means fraud already happened. You detect fraud, preferably as early as possible, so the financial 💸 and/or reputational damage is minimised.

Fraud prevention is all about reducing the chance of fraud. Fraud didn’t actually happen yet, but you are doing everything you can to prevent fraud. You want to know who or what you are dealing with before a final transaction happens (#kyc etc.)

Scaling Fraud management

Let’s say you want to grow as a business (that’s a choice by the way) and let’s say you want to double your revenue by doubling the amount or orders. If you keep your fraud management at the same level (both prevention and detection) the amount of fraud will also double. That means your fraud operations (detection) needs to double as well, including customer support, dealing with the police 👮‍♀️ etc, and so on. Furthermore, if you make your detection even better by innovating, you will probably find even more fraud. That means, at least temporarily, the damages grow 📈 even more percentage wise. So, although you can do fraud detection smarter, scaling is hard.

Fraud prevention does scale. When you put more innovation effort on how to prevent fraud from happening, you make sure the chance of fraud is lower. And as a consequence, the need for fraud detection lowers as well in the long run. The more you prevent, the less you need to detect. 

⚖️ We all know this is a 🐈 and 🐁 game, so you cannot only do one thing. Both prevention and detection need to be on par, especially because detection can give learnings for your prevention efforts. But, if you want to scale fraud management, double down on prevention.

#innovation #management #fraud #fraudprevention #frauddetection #kyc