Gen Zers are so frustrated with the economy that they think it’s okay to commit fraud

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

In the fourth quarter of 2023, 42% of Gen Z admitted they were willing to engage in first-party fraud, where they dispute a purchase with their payment provider even though the purchase was legitimate. This is significantly higher than any other generation – the next highest level is millennials, with only 22% admitting to being involved in first-party fraud. This quarter, we found that 33% of Gen Z respondents either know someone who has engaged in payment fraud or have done so themselves. Again, these percentages are much higher than other generations.

This data may seem sensational, but if we examine it more deeply, it is very revealing. Scientists have a theory called the “fraud triangle,” which states that people are more likely to commit fraud if they have an incentive, a rationalization, and an opportunity.

Gen Z faces constant and varied financial challenges

Gen Z has a number of adverse economic factors to worry about. An Intuit survey found that 73% of Zoomers believe the current economic environment has made saving money more difficult. They are struggling with increased housing costs, student loan debt and rising prices for everyday purchases like groceries, while wages are stagnant for workers at many income levels.

These factors lead to a financially stressful situation that makes it more difficult to afford daily necessities. Not surprisingly, greater economic anxiety can inspire people to look for tactics to stretch every dollar. For most, these behaviors are harmless: clipping coupons, switching from name-brand to generic items, or shopping second-hand. In fact, Gen Z is also the most likely to shop for used items online, with 42% of this generation purchasing a resale item in the past year.

But faced with the wrong set of circumstances, some people will turn to stolen payment methods or chargebacks to get more for 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 fix or even as a moral gray area with few consequences for anyone.

They approach brand loyalty differently

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

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

This mentality extends beyond the business they buy from. Gen Z also prioritizes spending flexibility and is more attracted to monthly subscriptions or sharing services that allow access without the commitment of ownership, from car sharing to video streaming to product subscriptions.

With this desire for unfettered access to goods and services comes a natural drive to maintain that access, which may make buyers more willing to turn to criminal means to do so. The logic is that a company will most likely notice if you steal a car or TV, but the risk is much lower with a monthly subscription of $6.99.

They are digital natives

Gen Z is more 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 scams. Going back to iconic online scammers like Anna Delvey and Fyre Fest, there’s a newer category of influencers promoting more outright scams, selling step-by-step guides detailing how to hack accounts or make purchases with stolen payment methods. Sift data found that 34% of Gen Z have seen offers to participate in online scams, compared to just 9% of Baby Boomers. This exposure to social media content is another key reason Gen Z is more likely to commit fraud – and highlights the profound influence social media has on consumer behavior.

The unique challenges and perspectives of this generation create the need for a nuanced approach from businesses, one that addresses their economic concerns, adapts to their consumer habits and engages with them when they are online.

Some proven approaches include:

Emphasis on authenticity and social responsibility. This helps consumers feel a deeper emotional connection with the brand and prevents them from treating it as an impersonal entity.
Providing discounts and flexible payment options like BNPL (Buy Now Pay Later) so users can simultaneously save and spend money.
Promoting flexibilitythrough offers such as low-cost monthly subscriptions.
Offers clear return policies to minimize return fraud and give more peace of mind to shoppers.
Responsive customer service a priority and offering refunds or alternatives immediately so buyers don’t have to resort to chargebacks to resolve issues.

Gen Z’s willingness to engage in online fraud is a reflection of the complex interplay of economic pressures, changing consumer behavior 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 different approach to brand loyalty and consumption.

It is essential that these findings and recommendations are viewed not as an indictment of a generation, but as a window into a group that is increasing its purchasing power despite facing more economic obstacles.