{"id":7124,"date":"2023-04-28T00:00:00","date_gmt":"2023-04-27T16:00:00","guid":{"rendered":"https:\/\/www.fraudlabspro.com\/resources2\/tutorials\/protect-your-business-from-loyalty-fraud\/"},"modified":"2026-05-26T18:12:07","modified_gmt":"2026-05-26T10:12:07","password":"","slug":"protect-your-business-from-loyalty-fraud","status":"publish","type":"docs","link":"https:\/\/www.fraudlabspro.com\/resources\/tutorials\/protect-your-business-from-loyalty-fraud\/","title":{"rendered":"Protect your business from loyalty fraud"},"content":{"rendered":"\n
\"Safeguard<\/a><\/figure>\n\n\n\n

Businesses use loyalty programs as a marketing strategy to motivate customers to make repeat purchases of their products or services by offering rewards or benefits. Loyalty programs which include discounts, exclusive offers or free products or services are good in strengthening customers’ relationships with brands or services and thus boosting sales. As more and more businesses start using loyalty programs, naturally fraudsters will take note. Fraudsters will take advantage of vulnerabilities in the loyalty program’s structure. Exploiting such deficiencies allows them to obtain rewards or benefits they are not rightfully entitled to. Thewisemarketer<\/a> reported that the estimated cost of loyalty fraud to program operators is estimated to be over $1 billion every year.<\/p>\n\n\n\n

Loyalty fraud can lead to financial losses from stolen rewards and a loss of trust from customers. Before things worsen, it is important to take some steps to prevent loyalty fraud to protect businesses.<\/p>\n\n\n\n

What is loyalty fraud<\/h2>\n\n\n\n

Loyalty fraud which is also known as reward fraud or point fraud happens when fraudsters exploit loyalty programs for their own gain. This type of fraud can include activities such as creating multiple accounts, using stolen or fake information to sign up, or exploiting program loopholes to earn rewards without spending money.<\/p>\n\n\n\n

Types of loyalty fraud<\/h2>\n\n\n\n
\"Types<\/figure>\n\n\n\n
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Fraudsters often target customers’ loyalty accounts by using various methods, including account takeover, point theft, coupon fraud, and card-not-present fraud. Knowing what kind of loyalty fraud types will help to detect and prevent it.<\/p>\n\n\n\n

Account takeover fraud<\/h3>\n\n\n\n

Fraudsters gain access to customers’ loyalty accounts by stealing their login credentials. Then, the fraudsters redeem rewards, points or benefits associated with the accounts. They usually achieve this through phishing attacks, password reuse, or exploiting weak security measures.<\/p>\n\n\n\n

Point theft fraud<\/h3>\n\n\n\n

Fraudsters steal loyalty points from customers’ accounts. They may also manipulate loyalty systems to increase their rewards balance via bugs or loopholes in the system.<\/p>\n\n\n\n

Coupon fraud<\/h3>\n\n\n\n

Fraudsters use fake coupons to obtain discounts or rewards. By using brute-force, fraudsters can try out various permutations of coupon codes.<\/p>\n\n\n\n

Internal fraud<\/h3>\n\n\n\n

Members from within the organization abuse the loyalty programs. They will commonly give their friends and family freebies or discounts.<\/p>\n\n\n\n

Friendly fraud<\/h3>\n\n\n\n

Customers violate terms of service to claim unauthorized benefits. E.g., multiple members of a family accrue points on the same account.<\/p>\n\n\n\n

Why fraudsters target loyalty programs<\/h2>\n\n\n\n