Survey: First-party fraud rises during holidays, especially among Gen Z
A new report reveals that one-in-eight Americans, and a large portion of Gen Z, committed first-party retail fraud over the holiday shopping season.
Socure, a provider of artificial intelligence for digital identity verification, sanction screening and fraud prevention, unveiled research revealing that 13% of Americans committed first-party fraud over the 2024 holiday shopping season.
First-party fraud, sometimes referred to as "friendly fraud," occurs when consumers exploit return and refund policies for financial gain. Socure says examples include disputing legitimate credit or debit card transactions, falsely claiming that a delivery has been lost or stolen to receive a refund or making purchases with a credit card or buy now pay later lender with no intention of paying it back.
[READ MORE: Losses from return fraud and abuse exceed $100 billion]
More than a quarter of Americans (27%) say that they were more likely to commit first-party fraud when purchasing holiday gifts. Nearly all offenders (90%) cited financial struggles as their motivation, including factors such as inflation and high credit card interest rates, and nearly half of those Americans who committed first-party fraud (49%) over the holidays did so because they had gotten away with it in 2023.
Younger shoppers were the top offenders as 40% of Gen Z admitted to committing first-party fraud over the 2024 holidays, which Socure says is particularly worrisome as these consumers are highly coveted by financial institutions and retailers thanks to their growing spending power and influential online presence.
Wealthier consumers didn’t shy away from fraud themselves. Those with household incomes of more than $100,000 were twice as likely to engage in first-party fraud compared to those with lower incomes (25% vs 11%).
Fraudulent "porch pirate" claims, when a consumer falsely reports that a delivered package left outside was stolen, were three times more likely to occur over the holidays compared to any other time of year.
Overall, a third of all Americans (34%) admit to committing first-party fraud, with over half (59%) of this activity occurring in the last year. Much like during the holidays, 60% of all offenders point to economic hardships as their primary reason.
"The holiday shopping surge is one of the busiest times of year for financial institutions and retailers,” said Ori Snir, head of product management, fraud and identity solutions at Socure. “Despite increased consumer spending, rampant first-party fraud is doing tremendous damage to their bottom lines – and ultimately the U.S. economy. Far too many shoppers are exploiting the system without consequences. Without action, this will only continue to get worse while destroying trust, damaging customer relationships and putting unnecessary strain on business operations."
Socure’s data was conducted through an online survey prepared by Method Research and distributed by PureSpectrum among 2,000 adult U.S. consumers (age 18+) who have made a purchase in the last six months. The sample was split equally between genders, with a spread of age groups, race groups and geographies. Data was collected from Dec. 6-13.
