7-minute read

Make safer shopping spaces

The fear of scams has a major influence on the shopping behaviours of Gen Z and younger Millennials (born between 1997-2012 and 1990-1997 respectively). Considering the risks that make them susceptible to falling victim to and committing fraud, there is an opportunity to implement the right tools and payment solutions that can help prevent customers and businesses from becoming victims of fraud. With 15% of 18 – 24-year-olds having already fallen victim to online scams¹ and an estimated £580m² of fraud reported in the first half of 2023.

The in-store advantage: how offline trumps online for trust

Despite their comfort with the online world, in-store retail experiences still matter to Gen Z and younger Millennials. In our study, only 32% preferred shopping via a website with their favourite retailer, 17% via an app and 3% via social.²

This bias against offline shopping can be explained by the advantages of browsing and buying in person, from immediate gratification to socialising with friends. However, our research shows that security concerns also play a vital role in how younger generations shop – pushing them away from digital and towards in-store. Trust in physical retail experiences led 62% of our respondents to state that in-store was the safest way to shop.² While 36% felt safe purchasing from a retailer’s website compared to 2% on social, around 40% of all respondents reported eCommerce security concerns.² This awareness of online risks – such as phishing scams and fake websites – presents an opportunity for legacy brands to differentiate themselves by building secure online payment experiences.

Seeing is believing

In contrast to the online experience, 44% felt safer because the ability to see and feel goods increased control over the quality, fit or condition of products they bought.³ By enhancing in-store tactile experiences, brands could help attract and retain customers who appreciate the ability to see and feel goods. For example, the ethical beauty chain Lush has stripped away more packaging barriers to enhance its environmental and experiential credibility. Now, customers simply scan these ‘naked’ items on an augmented reality app for information such as ingredients or prices.⁴

Scam-free stores

The in-store experience eased 35% of respondents’ concerns about payment security and fraud.³ They saw paying face-to-face as inherently lower-risk and safer as it lets them pay their own way and control their data. To keep these customers happy, brands must be transparent about handling and securing customer data, while also providing secure and smooth in-person payment experiences for preferred payment methods.

Human reassurance for in-store security

Perhaps most surprisingly, 14% saw shopping in-store as safer because the experience was emotionally familiar.³ Respondents cited the ability to interact with real people, especially to raise and resolve problems, as a safety factor. For customers wanting a one-on-one experience, retailers could look at supporting in-store staff with more training and freeing up their time with innovations such as self-service checkouts.

What does it mean for digital shoppers?

Delivering a better online retail experience is possible by building a reputation for producing goods that live up to online promises, ensuring digital payment systems are secure and prioritising customer service when things go awry. This is supported by the three factors, David Jeffrey, Product Director of Intelligent Payments and Risk at Barclaycard Payments highlights, “their payment details are protected, that they’re going to get what they ordered in a timely manner and that they’re going to be able to access support”.

However, only 15% of the customers who felt online was the safest way to shop cited payments and payment security as the reason. 77% stated more experiential and emotional reasons for perceiving eCommerce as safer, such as personal privacy and freedom from personal interactions.²

What makes Gen Z vulnerable to fraud

Ironically, Gen Z’s vulnerability to online scams comes from confidence in using and adopting new technologies as their use increases their exposure to scams and may change their risk perception. For example, 51% are interested in shopping in the metaverse.⁵ According to a study by Deloitte, Gen Z consumers were three times more likely to have fallen for an online scam than someone from the Baby Boomer (1946 to 1964) generation (16% versus 5%). ⁶ With 91% of 18 – 24-year-olds confident they could spot a fake request for personal information,⁷ their confidence in their ability to identify a scam is misplaced. Gen Z is susceptible to a range of scams, from fake websites to counterfeit goods.

A scammer’s paradise

Innovative, adaptable, and quick to adopt new technology, scammers often embrace new trends with large-scale criminal operations based in other countries using trafficked labour.⁸

Scammers employ thousands of techniques to extract money or personal information from victims, with scams that target Gen Z including:

• Purchase scams – paying for goods or services they never receive
• Romance scams – fraudsters gain the victims’ trust through fake affection and then ask for money or personal financial information
• Influencer scams – victims pay postage for non-existent free products as part of a fake brand ambassador role
• Investment scams – victims are tricked into handing over money for fake high-return investments such as cryptocurrencies
• Employment scams – fake job postings that extract personal information, or work offers that involve paying for non-existent supplies or training.

Fraud affects customer experience

Strong Customer Authentication (SCA) regulations were enacted in the UK in March 2022 and brought in wide adoption of enhanced security. This can explain the 12% drop in reported losses during the first half of 2023 in the UK⁹ after 8 years of rising remote purchase fraud. However, UK Finance reports that the total loss to remote purchase fraud for H1 of 2023 still added up to £173.8m – so payment fraud remains a crucial issue.

The risk for brands is that victims of payment fraud may identify brands or card companies as potentially responsible for the crime. As card companies can reject payments from retailers who experience high levels of fraud, preventing fraudsters from using customers’ credentials is important to remaining a trusted brand.

Chargeback fraud: the rise of Gen Z fraud

Chargeback fraud – known as friendly or first-party fraud – is where a customer exploits consumer protections to falsely claim a refund from a card issuer for goods or services already received. These mechanisms give consumers confidence that if a business goes bust or fails to deliver, they can get redress. However, in clothing and accessories retailing, consumers are abusing this safety – with 42% of Gen Z consumers admitting to engaging in chargeback fraud.¹⁰

For most merchants, the first step in tackling this is reducing accidental chargeback fraud claims by:

• ensuring business names appearing on credit card statements are recognisable
• informing customers about their cancellation and returns policy, including dispute handling
• training customer service teams to deal with issues promptly and fairly – to ensure chargebacks aren’t the first step for customers.

The shopping list for brands

The potential value of Gen Z and younger Millennials as customers should only grow as they get older and their spending power increases. While more education on how to spot a scam is needed, brands can also limit instances of fraud committed by criminals – and those by Gen Z – to establish a reputation as a safe retailer. This is possible by using robust fraud screenings in payments processes, as seen with Barclaycard Payments’ built-in fraud protection, to ensure a frictionless shopping experience for low-risk customers. This payment and data security, in tandem with emotional and experiential considerations, can help 18 – 34-year-olds agree that their shopping experience is smooth and safe. 

¹Source: Half year fraud update, UK Finance, October 2023.
²Source: Barclaycard-commissioned Maru poll of 500 UK consumers aged 18 to 34 (February 2024).
³Source: Barclaycard-commissioned Maru poll of 500 UK consumers (February 2024); verbatim analysis conducted by krow.
⁴Source: Digital Engagement: A social future, Lush, March 2023.
⁵Source: Future of Retail: Is Gen Z leading the way?, Alchemmy, October 2022.
⁶Source: Why Gen Z is More Vulnerable to Online Scams, Shatterproof Agency/Early Warning Labs, 2023.
⁷Source: Gen Z more likely to be tricked by criminals, UK Finance, September 2023.
⁸Source: Online scam operations and trafficking into forced criminality in Southeast Asia, United Nations, 2023.
⁹Source: Half year fraud update, UK Finance, October 2023.
¹⁰Source: 42% of Gen Z admit to committing ‘friendly fraud’, Fast Company, February 2024.

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