The Rise of Friendly Fraud Among Gen Z and What Businesses Can Do - DirectPayNet
young thief with big bag on back in front of storefront

The Rise of Friendly Fraud Among Gen Z and What Businesses Can Do


Friendly fraud is where customers dispute transactions they actually made through their credit card company or bank, aiming to get their money back. It’s as problematic as it sounds.

42% of Gen Zers (those born between 1997 and 2012) have fessed up to committing friendly fraud. With the digital world at their fingertips, disputing a transaction is easier than ever. And with online shopping and alternative payment methods skyrocketing, the payments industry is sitting up and taking notice.

Why does this matter? Because Gen Z’s shopping power is only going up. We’re talking about a group that’s going to be driving spending for the next decade. So, beating credit card fraud is a must.

cartoon of small people in front of a giant phone with cloud and payment symbols all around

But, why?

Why Are Gen Z Shoppers Pulling the Friendly Fraud Card?

Imagine growing up with the internet not as a new frontier, but as your playground. That’s Gen Z for you. Millennials arguably had it easier. Buying with a click and disputing credit card charges online? No biggie for them. But this digital savviness comes with its downsides, like an ease in filing chargebacks, even when they’ve received what they paid for.

There’s also a bit of a gap in understanding the real impact of friendly fraud on ecommerce businesses. For these younger generations, everything is instant and disputes are just another online transaction. The concept of harming a physical store’s bottom line might not even cross their minds. And let’s not forget the financial squeeze—when the budget’s tight, the allure of “getting my money back” becomes even stronger.

But here’s the thing: it’s not just a Gen Z problem. It’s just that their digital-first lifestyle and current economic pressures make them more prone to it. The fix? Education and better communication about the consequences of friendly fraud, alongside smarter payment options and security measures.

storefront with "FRIENDLY FRAUD" written above

You’re paying more than you know.

The Real Cost of Friendly Fraud to Your Business

Did you know friendly fraud costs are predicted to hit $100 billion globally this year? That’s a 16% jump from last year. We’re talking about direct hits to your revenue, not to mention the headache of dealing with chargebacks, higher fees, and even the risk of getting cut off by payment processors.

Who’s getting hit the hardest? Think digital goods, subscriptions, clothing, groceries, food delivery, and electronics. It’s a wide net, with consumers often using friendly fraud to wiggle out of payments after enjoying services or goods.

Beyond the immediate financial pain, friendly fraud damages relationships with genuine customers and tarnishes your reputation. Fighting illegitimate chargebacks also means less time and money for making your actual customers happy.

balance with man on one side and woman on the other with various tech symbols all around

It’s a balancing act.

Gen Z Friendly Fraud Prevention

So, what’s the game plan? You can’t just stop selling to Gen Z—even knowing that they are likely fraudsters. That would be like refusing to serve the future. Instead, let’s talk strategy for keeping friendly fraud at bay:

Get Smart with Fraud Analytics

Use machine learning to catch suspicious or fraudulent activities as they happen. Understanding the “why” and “how” behind fraud claims and disputes can guide you in tightening up your defenses.

Communication is Key

Clear, transparent billing and product descriptions can cut down on confusion and disputes. Also, make sure your billing descriptors are easily recognizable.

Make Customer Service a Breeze

Offering quick and easy support can stop a dispute from turning into a chargeback. Plus, personal touches go a long way in building trust. It’s best to have an easy refund process to avoid first-party fraud scams.

Teach ‘Em Young

Directly engage with Gen Z on their favorite social media platforms to educate them about the impact of friendly fraud. Appeal to their sense of fairness and community impact. It’s likely that they don’t see what they’re doing as a contributing factor to a poor economy (whether they care about your business’s profitability or not).

Influence Through Influence

Partner with influencers who can speak to Gen Z in their language about responsible buying. Social proof is powerful.

Innovate Payment Options

Introduce flexible payment methods but pair them with solid verification steps, like multi-factor authentication, to ensure the person on the other end is who they say they are.

By tackling the issue from multiple angles and getting a fraud strategy under your belt—combining tech smarts with clear communication and a bit of social influence—you can protect your business from friendly fraud while still catering to the Gen Z market.

shield with lock on top of storefront

Protect your business from friendly fraud.

Your Next Move: Shield Your Business with a High-Risk Merchant Account

So, we’ve navigated the tricky waters of friendly fraud together, especially how it’s becoming a bit of a Gen Z trend. But knowledge is just the first step. The real magic happens when you take action to protect your business. That’s where a high-risk merchant account comes in.

Why a high-risk account, you ask? Because it’s designed with businesses like yours in mind—businesses that face higher risks of chargebacks and fraud. These accounts are tailored to offer stronger protections, more flexible payment solutions, and the kind of security that can give you peace of mind in a digital age where friendly fraud is on the rise.

Don’t wait for the next chargeback notice to take action. Secure your business’s future today by exploring high-risk merchant account options. It’s your move to outsmart friendly fraud and keep your business thriving.

Ready to fortify your defenses?

Dive in and discover how a high-risk merchant account can transform your approach to managing fraud and chargebacks. It’s not just about protection; it’s about empowering your business to grow with confidence, even in the face of challenges. Click here to take the first step towards securing your business against friendly fraud.


About the author

As President of DirectPayNet, I make it my mission to help merchants find the best payment solutions for their online business, especially if they are categorized as high-risk merchants. I help setup localized payments modes and have tons of other tricks to increase sales! Prior to starting DirectPayNet, I was a Director at MANSEF Inc. (now known as MindGeek), where I led a team dedicated to managing merchant accounts for hundreds of product lines as well as customer service and secondary revenue sources. I am an avid traveler, conference speaker and love to attend any event that allows me to learn about technology. I am fascinated by anything related to digital currency especially Bitcoin and the Blockchain.