The whole point of rewards programs is that they are a reward for loyalty. Whether it’s a free cup of coffee every 8th visit, converting 5,000 airmiles into a summer holiday, or converting 500 points into £2.50 to spend, the longer you save the better the rewards and of course by save what we really mean is spend. The problem is, you probably don’t check your loyalty programs points balance very often and sometimes there’s a nasty shock in store when someone discoveres their points have been stolen.
Far gone are the days of Green Shield Stamps where you had a physical record of your points with stamps stuck on a card. Today everything is electronic bits and bytes and, when your points vanish into the ether, suddenly that loyalty program that was supposed to make you love the retailer has left a nasty taste in your mouth and the customer relationship has soured.
There were more than a handful of cases of points being stolen from loyalty programs just before Christmas. People naturally collect points on their loyalty program cards throughout the year each time their do their big weekly or monthly shop and want to spend them at Christmas rather than cash them in in dribs and drabs throughout the year and that’s when victims realise the £100 they’d saved up has gone missing. Users of both Nectar and Morrisons More fell victim last year.
Now fraud specialists Forter have launched the Forter Loyalty Program Protection solution to protect high value rewards programs from fraud and abuse, enabling merchants to offer enhanced programs with the best possible customer experience.
Loyalty program fraud rose 89% year on year, predominantly driven by the amount of personally identifiable information (PII) available from increasing numbers of data breaches. With direct and indirect losses from loyalty and reward points fraud estimated at $1 billion every year, enterprises are struggling to limit damage as fraud attacks shift from the point of transaction to different elements of the buyer’s journey, including new account signup, login, and promotion and coupon use.
“Our loyalty program allows us to thank our customers by rewarding them with better benefits and a better experience while also enabling us to stay ahead of the competition. Features like ‘Tell-a-friend,’ rewarding customers for referrals, are extremely popular, but are also a target for fraudsters and bad actors. Forter has helped us reduce loyalty program fraud by more than 60 percent while we build stronger relationships with our customers.”
– Doug Ferreira, Director, Financial Operations, delivery.com
Loyalty programs have grown steadily in the last decade, with memberships increasing nearly 10% year on year. Consumers have accumulated $48 trillion of unspent loyalty points globally. Nearly half (45%) of loyalty program accounts are inactive, with consumers not tracking or redeeming points.
Merchants are unprepared to protect their loyalty programs, according to research conducted by Forter:
- 42% state that they do not have the skills required to prevent fraud and abuse.
- Nearly 50% report insufficient resources, and that loyalty program account fraud prevention is considered a low organisational priority.
“The combination of consumers not paying attention to their accounts and merchant lack of preparation is a big reason fraudsters find loyalty and rewards programs so alluring. It is clear that loyalty program accounts are low hanging fruit for fraudsters. Loyalty program points are a currency as valuable and untraceable as cash, and fraudulent activity in these accounts causes damage to brand reputation and monetary losses to merchants and consumers alike.”
– Michael Reitblat, CEO and Co-Founder of Forter
Cyber criminals take advantage of loyalty programs in several ways. The most significant attacks include:
Fraudsters hack into member accounts, exploiting accumulated points and payment instruments saved in the account.
New account fraud
Fraudsters create fake accounts, often using stolen identities, and use them to accumulate, store, sell, and redeem stolen points.
Consumers overshare coupons or promotional codes, violating merchant policies and illegitimately gaining program rewards.
Forter’s Loyalty Program Protection solution is the only integrated fraud prevention platform that protects loyalty programs from all types of fraud and abuse, including transactional fraud, account-based fraud, and policy abuse.
“Merchants need to fight fraud together. Forter’s Loyalty Program protection solution gives merchants the only fully integrated fraud protection platform that protects 100% of the customer journey, not only at the point of transaction. Powered by a coalition of the biggest enterprises and designed by the world’s foremost experts, only Forter can provide the intelligence needed to stop fraudsters in real time and enable the best consumer experience.”
– Michael Reitblat, CEO and Co-Founder of Forter