Loyalty program fraud has seen an astronomical rise of 89% year-on-year, and is now estimated at $1 billion each year. According to e-commerce fraud prevention agency Forter, this is predominantly driven by the amount of personally identifiable information (PII) available from increasing numbers of data breaches.
According to e-commerce fraud prevention agency Forter, 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.
Loyalty programs have grown exponentially 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 programme accounts are inactive, with consumers not tracking or redeeming points.
“The combination of consumers not paying attention to their accounts and merchant unpreparedness 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,” said Michael Reitblat, co-founder and CEO of Forter.
“Loyalty program points are 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.”
Cyber criminals take advantage of loyalty programs in several ways. The most significant attacks include:
● Account takeover: 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.
● Policy abuse: Consumers overshare coupons or promotional codes, violating merchant policies and illegitimately gaining program rewards.
Forter said its new 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,” said Reitblat.
