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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.

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.

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’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.