Dive Brief:
- Teens are increasingly becoming targets for scams, partly due to their inexperience with financial services, the Federal Reserve said in a Tuesday report, pressing banks to tailor their fraud prevention messaging to the young cohort.
- Consumers under the age of 29 lost $500 million to scams last year, and that amount was a 20% increase over 2021, the Fed said in the report, citing data from the Federal Trade Commission.
- ”As financial crime evolves, teens and young adults remain a primary target for criminals seeking to exploit their life transitions, digital habits and inexperience,” the report said. “With losses among young consumers rising sharply, financial institutions have a critical role to play.”
Dive Insight:
Scams, which are frauds that use false pretenses to dupe consumers into transferring money to a criminal, have become a billion-dollar problem in the U.S. While the elderly are often victims, sometimes because they are less digitally savvy, young people may be vulnerable partly because they’re overconfident in their digital environments, the Fed report said.
The Fed cited another organization’s survey that showed Gen Z consumers – those born between 1997 and 2012 – believe they can recognize a scam, but then demonstrated poor skills in verifying whether an online request for information was legitimate.
Young people are exposed to threats as they navigate new experiences, such as opening a financial account, finding a new job or renting their first apartment.
“With limited financial experience, they may not yet know what legitimate financial or business interactions typically look like,” the report from the central bank said. “This can make it harder to spot red flags commonly present in scams.”
Some typical scams directed at youth include “exclusive online deals like flash sales or limited-edition drops;” job offers with “high pay, minimal qualifications and immediate hiring” that require upfront payments or the purchase of materials; and convenient and timely apartment rentals online that require “quick payment of fees or deposits,” according to the Fed report.
Some red flags that may elude young people include being pressured to act immediately, asked to share personal information, and lured into using an untraceable payment method, like a gift card.
Young consumers may also more frequently encounter such come-ons because they spend more time online, perusing social media, engaging in digital gaming and shopping in online marketplaces, the Fed noted.
More than half of people (56%) who came across a scam online responded in a way that led them into a scam, with about a fifth of them (21%) ultimately losing money, the Fed said, citing a report from the Global Anti-Scam Alliance.
Such scams are being supercharged now by artificial intelligence, with criminals using more sophisticated pitches and tools to trick consumers into clicking on links and stealing funds via instant money transfers.
By shaping their messaging for young people, banks may be able to better help such consumers avoid scams, the Fed said. The central bank recommended educating those new customers when they’re opening accounts, signing up for mobile banking or enrolling for peer-to-peer tools.
The Fed also suggested timing messaging to young peoples’ lives, like providing information about housing scams in June or July when such consumers often look for housing options, or offering education about job scams in spring when they look for work. The counsel can include that “real employers” don’t ask for upfront payments and “reputable businesses” don’t use gift cards for payments.
“By providing targeted education, implementing thoughtful controls and delivering timely interventions, institutions can help young consumers navigate risks,” the report said.
