While BNPL offers many advantages to consumers, there are also associated risks. These include potentially accumulating debts along with hidden fees, and penalties or interest on missed payments. Consumers need to be conscious of these risks and make sure they read the repayment terms and plan their expenses accordingly. For merchants, the risks are much lower. If the consumer does not repay an installment in time, the merchant typically never knows, as the BNPL provider has already transferred the amount due to the merchant. Consumers take out the BNPL loan with the BNPL provider, not with the merchant, and the provider is responsible for remunerating the merchant. As such, the risks associated with the loan are assumed by the BNPL provider. There are however some risks for merchants: Reliance of a third party: With the BNPL provider acting as a middleman in the purchasing process, merchants rely on their providers being reliable and secure. Any security breaches at the BNPL provider can reflect negatively on the merchant and their business. Increased risk or returns: As BNPL allows consumers to try out products before they pay, the likelihood of consumers purchasing multiple items or making more frequent purchases increases, and so too does the risk of returns. This results in additional effort for merchants and increases associated costs.