- First-party delivery fraud costs U.S. merchants and financial institutions over $100 billion a year.
- 35% of surveyed Americans between the ages of 18 to 77 admit to committing first-party delivery fraud, according to Socure.
- Gen Z consumers are most likely to commit first-party delivery fraud, with 52% saying they’d do it if there were no negative consequences.
First-party delivery fraud is becoming another driver for inflationary pressures in the United States, as businesses offset losses with higher prices. According to a recent survey by digital identity verification firm Socure, this type of fraud costs U.S. merchants and financial institutions over $100 billion a year.
First-party delivery fraud occurs when someone uses their identity to commit a dishonest act for financial gain. Socure’s survey found that 35% of the 1,000 Americans between the ages of 18 to 77 admitted to engaging in this type of fraud.
“Think of it as buying and lying,” said Yigit Yildirim, senior VP and general manager of fraud and risk products at Socure, in an interview with FOX Business.
“Examples include falsely claiming that a delivery for an online order has been lost to get a refund, choosing to indefinitely not pay off a credit card bill, making a Buy Now, Pay Later purchase with no intention of paying it off or disputing legitimate financial transactions.”
Socure’s survey also revealed that Gen Z consumers are most likely to commit first-party delivery fraud, with 52% saying they would do it if they knew there would be no negative consequences. Additionally, 20% of Gen Z consumers, a rate three times higher than Baby Boomers, say they don’t consider the act to be ethically wrong.
“First-party fraudsters target financial institutions and merchants, the businesses that they bank with, borrow or buy from,” Yildrim said. “Large national banks, community banks, credit unions, lenders, fintechs and crypto have all been impacted.”
Amazon prohibits third-party sellers from sending unsolicited packages to customers. The company asks consumers to report any packages they did not order and that are not gifts.
“When fraudsters get away with theft, consumers ultimately pay the price through higher costs and additional fees,” Yildrim added. “We’re all stuck footing the bill.”
Data compiled by FICO shows that first-party fraud typically makes up roughly 10% of credit volume losses, or bad debt, and more than 20% of the value.
“As more consumers move online, we’ll start to see a shift away from in-person theft at brick-and-mortar locations to online scams like first-party fraud,” Yildrim said.
“Old-fashioned shoplifting won’t go extinct, but unless something is done to thwart the issue, more people will begin to realize how easy it is to carry out these scams from the safety of their own homes.”
Yildrim also pointed out that outdated regulatory policies and a lack of data sharing make it far too easy for these fraudsters to continue cheating the system.
The alarming rise in first-party delivery fraud, costing over $100 billion a year, is yet another factor driving inflation in the US. With 35% of Americans admitting to engaging in this dishonest behavior, it’s clear we have a moral crisis on our hands. Gen Z consumers, alarmingly, are the most likely to commit this fraud, with many not even considering it unethical.
It’s time for businesses and financial institutions to take a stand against this deceitful practice. Outdated regulations and lack of data sharing are emboldening these fraudsters, and unless we address the issue head-on, we’ll all continue to pay the price.
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