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4 Common Loyalty Program Scams, and How to Prevent Them

An estimated $3.1 billion in redeemed loyalty points are deemed to be fraudulent, according to the Loyalty Security Association. Yet half of all merchants say program fraud protection is a low priority. Mix the two, and we have a rise in loyalty program pillaging. Here’s how to spot a points pirate, and protect your brand’s reputation.

By: Jenn McMillen

Reward Points are Treasure, and Treasure Gets Stolen

Therefore, guess what? Loyalty program points are being plundered, at epidemic rates.

The spate of smash-and-grab thefts in Los Angeles may be grabbing headlines (with $25,000 in designer purses stolen from Nordstrom, how could it not?). However, loyalty reward theft represents a far more insidious theft, and it’s taking place right under your nose.

From 2018 to 2019, the most recent year for available data, loyalty program fraud rose 89%. This should surprise no one. Loyalty points have monetary value, and there are $48 trillion worth of unspent points out there – often unwatched and forgotten, as nearly half (45%) of reward program members are inactive. (In the U.S. alone, program members are sitting on more than $140 billion worth of unused rewards points, according to data from Gartner.)

Considering that only $3.1 billion of that $48 billion in unspent treasure is stolen, there’s a lot of untapped opportunity out there for scammers.

Oh, the Many Kinds of Rewards Fraud

Despite the rise of reward program fraud, 42% of merchants say they do not have…

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