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Education

Safeguarding loyalty

and rewards programs

After all, that's what fraudsters do, turn stolen goods and
services into cash as often and as quickly as they can.

Financial professionals regularly remind the public that
they should check their bank and credit card accounts daily.
It is only through such regular checks that accountholders
can spot fraudulent activity and act on it before it is too late.

Safeguarding rewards programs
Here are the three main factors businesses should consider
in keeping rewards programs safe:
1. Keep the data safe: Minimize the amount of cus-
tomer data collected. Loyalty schemes, if hacked, can
lead to identity theft of your customers.

2. Educate members: Loyalty points have a cash val-
By Don Bush ue and should be treated with the same care as bank
Kount Inc. and credit card accounts.
3. Keep watch for fraudulent loyalty point transac-
ost companies prioritize the security of pay- tions: The indicators of CNP fraud – such as new or
ment and transaction information over that changed login credentials, changing or adding ad-
of loyalty and rewards programs. But don't dresses, different Internet service provider address-
M be fooled – anything of monetary value is fair es, irregular spending patterns and testing on small
game to criminals. items before going for the big-ticket items – are all
present for loyalty fraud too. Many of the techniques
Loyalty and rewards programs are a huge draw for used to fight CNP fraud can help fight loyalty fraud.
consumers, encouraging them to spend money to get future
benefits and discounts. Many save up points to use for a Following are best practices for protecting loyalty accounts:
big trip or purchase, making those points an extremely
valuable asset. And, often, these loyalty accounts are 1. Advanced screening technologies: Technologies
extremely vulnerable to fraudsters looking to turn points like device fingerprinting, geo-location, and proxy
into cash. piercing provide a first line of defense. Using them,
companies can know that consumers are who they
There is an estimated $225 to $350 billion in loyalty say they are, are where they say they are and are us-
programs, which are commonly used by merchants in ing the accounts they're entitled to use in a legitimate
many industries. Thirty-four percent of consumers only manner.
log into their accounts every few months; only 23 percent
check account balances even once a month, providing a 2. Machine learning: Computers have unlimited
huge window of opportunity for fraudsters to operate for capacity for finding the patterns that reveal suspi-
weeks undetected. cious "needles" worthy of greater scrutiny in an ever-
expanding haystack of transactions, while avoiding
How exactly do criminals access these accounts? Loyalty unnecessary consumer interactions. This can help
fraud tends to work along the same lines as card-not-present protect accounts and the user experience.
(CNP) fraud, with criminals gaining access through a mixture
of phishing scams, identity theft and hacking weak email/ 3. Order linking: Fraudsters will use multiple ac-
password combinations. Once criminals have these points, counts and devices to make dozens or even hundreds
they spend them, combine them with other accounts, sell of fraudulent redemptions and/or combine points
them or use them to receive an item that can be resold for cash. into accounts to earn prizes of greater value. That's

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