What is loyalty fraud?

Loyalty fraud happens when a fraudster hacks into a consumer’s personal information and takes over their loyalty points to redeem benefits.

The most common types of loyalty fraud include:

  • Making purchases to generate loyalty rewards where fraudsters take over customer accounts to order expensive merchandise and have it shipped to the customer, and the fraudster takes advantage of the loyalty points to purchase products that are easily resold or that can be returned for credit.
  • Hacking mobile apps and transferring points. This is especially common in the airline and travel industry.
  • Abusing referral codes and free trials by sharing them with large audiences or using multiple email addresses to sign up repeatedly.

Preventing loyalty fraud

Companies can prevent loyalty fraud in several ways:

  • Look for unusual changes to customer accounts, such as rapidly changing IP, mailing, and email addresses.
  • Communicate with customers often and remind them to check their points balances.
  • Consider restructuring your rewards system to be based on maximum engagement or minimum purchase amounts with set expiration dates.
  • Remind customers about password security and protecting their data from hackers and fraudsters.

Related Topics

Ecommerce Fraud Basics

Chargeback Management

Related Resources

Ecommerce Fraud Alert: How to Spot Loyalty Fraud

Identifying and Addressing the Latest Ecommerce Fraud Trends

Why Airline Fraud Is Unique – and What Airlines Can Do About It

Why card-not-present fraud is the most dangerous of card frauds

ECommerce Fraud Protection for Online Merchants: The Ultimate Guide