Loyalty fraud global awareness and protection.
Data and Privacy

How to Increase Loyalty Program Fraud Awareness and Protection

Image by Pete Linforth from Pixabay

All businesses have a responsibility to protect against fraud and chase down its perpetrators. The responsibility today goes beyond due diligence and is closer to a fiduciary responsibility carried out on behalf of customers, owners, and shareholders. Today, loyalty programs, with their valuable reward currencies and vast databases of personalized data, must be especially protected through preparation and vigilance.

A press release from Forter, a leader in e-commerce fraud prevention, caught our attention and made us think about how to increase Loyalty Fraud awareness and protection.

The press release announced the new “Forter Loyalty Program Protection” solution to “protect high value rewards programs from fraud and abuse, while also enabling merchants to offer enhanced programs with the best possible customer experience”. In this news release,  Forter referenced statistics from proprietary research commissioned in partnership with the Loyalty Security Association. The report is titled “Loyalty Fraud: Attacks From All Sides”.

Loyalty Program Fraud is on the Rise

In the research, a primary driver of loyalty fraud was found to be not just the giant storages of value in participants’ rewards accounts, but the fact that 45 percent of loyalty programs accounts are inactive. When program members are not paying attention to their accounts, fraudsters realize they have a perfect target for fraud.

The research also reported that 50 percent of merchants indicated that preventing and deterring loyalty fraud is a low priority. 42 percent say they don’t even have the skills internally to combat fraud. Put all of these factors together, and it’s no surprise that loyalty fraud is growing rapidly at 89 percent YOY.

Forter didn’t pay us to publish this news and even though they are a vendor selling a solution, we thought the research was valuable to share. The topic of  loyalty fraud prevention is incredibly important and sometimes not discussed enough.

Perspective from an Industry Expert

To add perspective to the news release, we contacted Christopher Staab, Chairman and Co-Founder of Loyalty Security Association to ask a few questions. Here’s what Chris shared with us:

Wise Marketer (WM): With all your work through the Loyalty Fraud association, what do you consider the most significant trends in loyalty fraud that people should know about?

Christopher Staab (CS): On top of the many publicized data breaches, companies should keep an eye on their call centers and mobile channels. As companies put in defenses against fraud online, fraudsters are attacking mobile apps or calling into the call center. Various providers focus on helping merchants to protect these channels, but in terms of the call center, training agents may be enough.

WM: How do companies go about getting more information on this topic?

CS: People can visit our Loyalty Security Website at www.LoyaltySecurityAssociation.com. We offer monthly webinars, organize various events, and have other resources like white papers.

WM: When announcements are made about a security breach at a retailer (think WaWa), how do we make clear the breach was equipment related (POS and fuel dispenser in this case) rather than loyalty program related? There are an increasing number of announcements that scare executives when an announcement blends all types of breaches together.

CS: The press mixes these types of fraud because the fraudsters mix them. If fraudsters obtain login credentials in a data breach, they often then attempt to access other accounts, including loyalty ones, of breached customers using the same credentials. This is another reason we should all practice good password hygiene and use different credentials for each account.

Reading the trends reported in the Loyalty Security Association report, and factoring in the insights from Christopher Staab, it goes without saying that it is highly recommended to pause, review, and study your loyalty fraud prevention, detection, and mitigation policies and procedures — because only YOU can prevent loyalty program fraud!

How to Increase Loyalty Program Fraud Awareness and Protection
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