Seventy-two percent of loyalty program executives have suffered fraud-related problems, according to a study by a Loyalty Security Association. 

In particular, cases of deceitfully redeemed flyer miles are a primary concern. The same research revealed that 1 percent of redeemed air miles are phony. That figure accounts for a $3.1 billion loss worldwide. 

Even more worrying, expenses incurred by the top five airline-loyalty programs jumped 12 percent to $27.5 billion in 2020.

Types of Loyalty Fraud

There are two types of loyalty fraud:

1. Internal Fraud. 

This happens when staff(s) who are part of the loyalty program’s control crew plan and execute an attack. These could be anyone with top-tier privileges. 

2.  External Fraud.  

These cases happen when fraudsters out of the organization attack a loyalty program. Cybercriminals may do this by stealing customer identities, taking over accounts, or via botnet attacks. 

According to analysts, account takeover is the most widespread attack. Stuart Barwood, head of global airline strategy at Forter, says one in every 300 sign-in attempts to loyalty schemes are attempts to take over client accounts–and fraudsters are targeting hotels and airlines programs.

How Can Brands Safeguard their Loyalty Programs?

Cybersafety professionals recommend layers of security across all areas. Here are some strategies to consider:

1. Safeguard customer accounts. Use multi-factor authentication to secure your loyalty program.

2. Use access controls. Staff should know only what they need to know. This kind of access reduces the likelihood of fraud.

3. Create comprehensive client profiles. Gather as much valuable data about your customers. This will help you identify fraudulent profiles and get rid of them.

4. Leverage tech to track customer behavior. Use AI to track customer behavior. Technology will help you identify fraudulent trends and help stop fraud before it happens.

Also, inform clients if an attack happens. Always warn the client immediately your fraud team detects an attack or attempt. That way, you will retain customer trust and protect your reputation.

Final Words on 

Though implementing an active fraud protection strategy comes at an extra cost to a business, the potential losses from fraud can turn out much worse from a financial and reputational perspective.

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