Each quarter, my company Sift produces an index report to better understand the latest online fraud trends, including how businesses and consumers are affected, emerging fraud tactics, and how fraud impacts consumer behavior when making purchases online. For the past two quarters, we’ve seen a surprising generational divide emerge: Gen Z—born between 1997 and 2012—expresses more willingness than any other generation to commit digital fraud.

In Q4 2023, 42% of Gen Zers admitted a willingness to engage in first-party fraud, in which they dispute a purchase with their payment provider despite the purchase being legitimate. This was significantly higher than any other generation. The next highest was millennials, with only 22% admitting to engaging in first-party fraud. This quarter, we discovered that 33% of Gen Z respondents either know someone who has participated in payment fraud or have done so themselves. Again, these rates are much higher than those of other generations.

This data might seem sensational, but if we explore it more deeply, it’s very telling. Academics have a theory called the “fraud triangle,” which argues that people are more inclined to commit fraud if they have incentive, rationalization, and opportunity.

Gen Z is facing persistent and diverse financial challenges

Gen Z has a number of unfortunate economic factors to feel anxious about. A survey from Intuit found that 73% of Zoomers feel that the current economic environment has made it more challenging to save money. They’re struggling with increased housing costs, student loan debt, and rising prices on everyday purchases like groceries, all while wages have stagnated for workers across many income levels.

These factors snowball into a financially stressful situation that makes it more challenging to afford day-to-day necessities. Unsurprisingly, more economic anxiety can inspire people to look for tactics to stretch every dollar. For most, this behavior is innocuous: clipping coupons, switching from name-brand to generic items, or shopping secondhand. In fact, Gen Z is also the most likely to shop for secondhand items online, with 42% of this generation purchasing a resale item in the past year.

But facing the wrong set of circumstances, some people will turn to stolen payment methods or chargebacks to get more with less. In these situations, consumers may rationalize fraudulent behavior by convincing themselves that their actions are necessary or justified given the economic environment. They may view their actions as a temporary solution, or even as a moral gray area with few consequences to anyone.

They approach brand loyalty differently

Gen Z may see large corporations as a cause for these broader economic challenges, making them less likely to view stealing from them as immoral. They may see this behavior as a victimless crime, as the companies they are transacting with are often industry behemoths.

They also have less loyalty to legacy brands compared to earlier generations. Name recognition alone is not enough to compel Gen Zers to make a purchase. Increasingly, they are looking for “dupes” as a way to save money, prioritizing cheaper goods and services over premium brands. This spans all types of purchases, from clothing and accessories to beauty and personal care products. They’re also more willing to try new brands and are less swayed by established names and celebrity endorsements.

This mentality extends beyond the businesses they buy from. Gen Zers also prioritize spending flexibility and are more drawn to monthly subscriptions or sharing services that allow access without the commitment of ownership, from car sharing to video streaming to product subscriptions.

With that desire for unlimited access to goods and services comes a natural drive to maintain that access, which could make shoppers more inclined to turn to nefarious means to do so. The logic is that a company will most likely notice if you’re stealing a car or TV—but the risk is far less likely with a $6.99 monthly subscription.

They’re digitally native

Gen Z is more heavily influenced by social media and spends more time online than any other generation, allowing online trends to dictate what they buy and how they get their news.

Their time on social media also exposes them to more fraud. Harking back to iconic online grifters like Anna Delvey and Fyre Fest, there’s a newer category of influencers that’s promoting more outright fraud, selling step-by-step guides that detail how to hack into accounts or make purchases with stolen payment methods. Sift data finds that 34% of Gen Zers have seen offers to take part in online fraud, compared to only 9% of baby boomers. That exposure to social media content is another key reason why Gen Z is more likely to commit fraud—and highlights the deep influence of social media on consumer behaviors.

This generation’s unique challenges and perspectives create the need for a nuanced approach from businesses, one that addresses Gen Zers’ economic anxieties, adapts to their consumer habits, and engages with them where they are online.

Some proven approaches include:

• Emphasizing authenticity and social responsibility. This helps consumers feel a deeper emotional connection to a brand and prevents them from treating it like a faceless entity.
• Providing discounts and flexible payment options like BNPL (buy now, pay later), so consumers can simultaneously save and splurge.
• Promoting flexibility through offerings like low-cost monthly subscriptions.
• Offering clear return policies to minimize returns fraud and give shoppers more peace of mind.
• Prioritizing responsive customer service and offering refunds or alternatives promptly so shoppers don’t turn to chargebacks to address any issues.

The willingness of Gen Z to engage in online fraud is a reflection of the complex interplay of economic pressures, changing consumer behaviors, and the influence of social media. This trend, while having a real business impact, stems from a place of financial stress, a desire for affordability, and a distinct approach to brand loyalty and consumption.

It’s essential to view these findings and recommendations not as an indictment of a generation but as a window into a group that is increasing its purchasing power, even as it faces more economic hurdles.

Last modified: July 2, 2024