Fighting back: how to protect against loyalty scheme fraud

With fraud and cybercrime at an all-time high, loyalty programs are joining the evolving list of lucrative targets being tapped by malicious actors.¹

Loyalty programs are a well-established marketing strategy used by smart businesses to build long-term, reciprocal relationships that keep customers coming back for more. And while such programs can reap exceptional financial benefits — when they work as they should — the opposite can not only impact an organization’s bottom line but cause lasting damage to its brand and reputation.

Often less secure and less rigorously monitored than other customer accounts, loyalty account vulnerabilities can lead to significant losses. There was a 202% increase in the volume of suspected digital fraud attempts from Canada between 2019 and 2023.²

According to EY whitepaper Unmasking loyalty scheme fraud, the loyalty market is slated to quadruple by 2029, and with online shopping only growing in popularity, it will be critical for organizations to safeguard their loyalty platforms and take measures to lock fraudsters out.

Whether protecting against data breaches or account takeovers, redemption fraud or policy abuse, focusing on the following can help reduce the risk associated with loyalty scheme fraud:

• People. Training employees to detect fraud and educating customers on how to protect against it are good first lines of defence.
• Technology. Implementing fraud detection solutions that employ machine learning, comprehensive authentication processes and data encryption can defend against vulnerabilities.
• Process. Combining identify verification with robust policies and regular auditing can reduce the risks for customers and businesses.
• Data. Key to identifying suspicious patterns, data plus regular review and analysis can guide fraud prevention measures, while collaborating with industry partners can help prevent cross-program or cross-industry-related losses.