Loyalty Programs and Fraud – Do You Know Its Impact?

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By Published On: February 5, 20200 Comments

In Australia, 92 percent of shoppers are a part of a loyalty program. With every retailer benefit system, there is a myriad of pros and cons to tackle. In a new study from Forter, these loyalty programs have been a target of fraud more than ever. 

These programs, from Woolworths Everyday Rewards to Mecca Beauty Loop, offer benefits for shoppers who spend more than others.

According to the Forter report, loyalty program related fraud has risen 89 percent YoY. ‘predominantly driven by the amount of personally identifiable information (PII) available from increasing numbers of data breaches’.

This is an average of $1 billion worth of direct and indirect losses from loyalty and reward points. “Our loyalty program allows us to thank our customers by rewarding them with better benefits and a better experience while also enabling us to stay ahead of the competition. Features like ‘Tell-a-friend,’ rewarding customers for referrals, are extremely popular, but are also a target for fraudsters and bad actors,” said Doug Ferreira, Director, Financial Operations at “Forter has helped us reduce loyalty program fraud by more than 60 percent while we build stronger relationships with our customers.”

The study found that 45 percent of loyalty programs are inactive, meaning there is a high risk for fraudsters to tap into these accounts. Moreover, 42 percent of merchants report that they do not have the skills internally to prevent fraud and abuse. Furthermore, 50 percent of merchants indicate that low organisational priority and/or lack of resources are the biggest barriers to preventing and deterring loyalty fraud.

“The combination of consumers not paying attention to their accounts and merchant lack of preparation 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, CEO and Co-Founder of Forter. “Loyalty program points are a 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.”

Protecting your online store and customer data is a crucial step every company has to take in order to combat cyber fraud in 2020. Retail Global is starting the new decade with a bang in its new Road to CX Series.

The Road to CX Series, hosted by Retail Global, covers a range of topics that are significant for every online retailer. No matter if the e-commerce platform sells fishing tackle or acts as a server for a web of online stores, fraud is a serious issue that needs to be addressed.

The Road to CX Success will address the nature, prevention and the future of fraud. Hosted by Forter, Power Retail and Retail Global, the event will also cover the following topics:

– Phishing
– E-Skimming
– Returns Fraud
– Payment protection
– Account protection

This is a free event that is taking place in Melbourne on 5th February. Get your free ticket before it’s too late.

About the Author: Power Retail

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