Each quarter, 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. Over the past two quarters, we've noticed a surprising generational divide: Gen Z—born between 1997 and 2012—shows a higher 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, where they dispute a legitimate purchase with their payment provider. This percentage is significantly higher than any other generation, with millennials being the next highest at only 22%. This quarter, we found that 33% of Gen Z respondents either know someone who has participated in payment fraud or have done so themselves, again much higher than other generations.
This data might seem sensational, but it reveals a lot upon closer examination. Academics propose the "fraud triangle" theory, which suggests 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 is dealing with several economic factors that cause anxiety. A survey from Intuit found that 73% of Zoomers feel the current economic environment makes it harder to save money. They struggle with increased housing costs, student loan debt, and rising prices on everyday items like groceries, while wages have stagnated across many income levels.
These factors create a financially stressful situation, making it difficult to afford day-to-day necessities. Unsurprisingly, more economic anxiety can lead people to find ways to stretch every dollar. For most, this behavior is innocuous: clipping coupons, switching to generic brands, or shopping secondhand. In fact, Gen Z is the most likely to shop for secondhand items online, with 42% purchasing a resale item in the past year.
However, under the wrong circumstances, some might turn to stolen payment methods or chargebacks to get more for less. Consumers may rationalize fraudulent behavior by convincing themselves that their actions are necessary or justified due to the economic environment. They may see their actions as a temporary solution or as a moral gray area with few consequences.
They approach brand loyalty differently
Gen Z may view large corporations as contributing to broader economic challenges, making them less likely to see stealing from them as immoral. They may consider this behavior a victimless crime, as the companies they deal with are often large industry players.
Gen Z also has less loyalty to legacy brands compared to earlier generations. Name recognition alone isn't enough to compel them to make a purchase. Increasingly, they look for "dupes" to save money, prioritizing cheaper goods and services over premium brands. This includes 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 influenced by established names and celebrity endorsements.
This mentality extends to the way they spend. Gen Zers prioritize spending flexibility and are more drawn to monthly subscriptions or sharing services that allow access without ownership commitments, from car sharing to video streaming to product subscriptions.
The desire for unlimited access to goods and services may drive some shoppers to resort to dubious means. The logic is that a company is more likely to notice if you’re stealing a car or TV, but the risk is much lower with a $6.99 monthly subscription.
