With the prevalence of online shopping and digital purchases, fraudulent transactions have become commonplace. In the past 18 months, 43% of consumers have fallen victim to payment fraud at least once. Not surprisingly, this is increasingly an issue for younger consumers who are more likely to engage in digital transactions, less tolerant of safety measures, and more prone to perpetrate fraud themselves.
Sift’s Q1 2024 Digital Trust & Safety Index found that Gen Z is more likely to have someone they know make unauthorized transactions with their payment credentials. They are also more likely to personally participate in payment fraud or know someone who has, as well as encounter offers to participate in fraud online.
Generational Differences
There are several factors contributing to this rise in fraud among younger consumers. Firstly, younger generations rely more on digital wallets and less on credit cards compared to older generations. Millennials and Gen Z are nearly 50% more likely than baby boomers and Gen X to use digital wallets for online shopping. Almost a third of Gen Z consumers shop online daily, compared to 15% of Gen Xers and 7% of baby boomers.
Gen Z is also less concerned about security. The Sift survey found that roughly 70% of the consumers ages 18 to 34 were inconvenienced when a bank asked for additional security checks for potentially risky transactions. So it’s no surprise that this group admitted to engaging in first-party fraud or filing a claim against a purchase that was made legitimately. In fact, an earlier Sift study revealed that 42% of Gen Zers did exactly this.
These findings also dovetail with Sift’s research into which industries are increasingly susceptible to payments fraud. Attempted payment fraud in the online gaming industry nearly doubled in 2023, rising by 93%. Other categories in which payments fraud grew the most last year include ticketing (up 68%), food orders & delivery (up 53%), and retail (up 46%).
Intense Growth Ahead
Merchant losses due to payment fraud reached $38 billion in 2023, but that’s just the beginning of the problem. Sift estimates that this number is expected to reach $362 billion by 2028.
But payment fraud doesn’t affect everyone equally. More than half of all payment fraud victims reported incomes of greater than $100,000 per year.
