A startling report by Sift a fraud management company found that nearly half of Gen Z individuals are engaging in ‘friendly fraud’, costing companies billions. This alarming trend not only tarnishes the image of a generation often viewed as progressive but also raises serious questions about the ethical implications of our increasingly digital world.
High Incidence of ‘Friendly Fraud’ Among Gen Z
A report from Sift reveals that 42% of individuals aged 26 and younger have admitted to committing first-party fraud or ‘friendly fraud’. This involves filing a fraud claim or dispute even after receiving and being satisfied with their purchase.
The rate of admitted friendly fraud is significantly higher in Gen Z compared to other generations: 22% in millennials, 10% in Gen X, and 5% in Baby Boomers.
Impact on Businesses
The article notes that friendly fraud is costing companies billions of dollars. Chargebacks are anticipated to cost $100 billion by the end of the year, with the average cost of disputes rising by 16% in 2022. Overall, 44% of Americans are filing disputes, regardless of their legitimacy.
The report suggests that backbreaking inflation is a major factor driving this ‘fraud economy’. Consumers are increasingly taking advantage of the dispute process and their consumer protections.
Trends in Disputes
A significant portion of these disputes involve ‘card not present’ online purchases. The sectors most affected are clothing and accessories, followed by subscriptions for digital goods, groceries, electronics, and food deliveries.
Consequences for Businesses
Besides direct financial losses, businesses also face the fallout from consumers who were victims of fraud on their sites, potentially losing their business and lifetime value.
Recommendation for Businesses
There is a strong need for businesses to implement proactive fraud strategies and end-to-end dispute management processes to preserve profitability and mitigate the impact of such fraudulent activities.