Loyalty programs are under attack. Sophisticated scammers are constantly devising new ways to exploit these valuable systems, putting both businesses and customers at risk.
At Reward the World, we’ve seen firsthand how fraud can devastate loyalty programs and erode customer trust. That’s why we’re committed to sharing essential fraud prevention strategies to help protect your program and your members.
In this post, we’ll explore common scams targeting loyalty programs and provide actionable steps to safeguard your valuable rewards ecosystem.
How Scammers Target Loyalty Programs
Loyalty program fraud is on the rise, and scammers continue to refine their tactics. Let’s examine the most common strategies fraudsters use to exploit these valuable systems.
Account Takeover: A Silent Threat
Account takeover fraud poses a significant risk to loyalty programs.
Criminals access a member’s account, often using stolen credentials, and deplete the points or miles. Loyalty fraud is surging in 2025, with U.S. loyalty programs facing $48 billion in unspent points at risk.
To combat this threat, businesses should implement strong password policies and multi-factor authentication. Regular monitoring of account activity can help detect unusual behavior early.
Points Theft and Underground Markets
After gaining access to accounts, scammers often steal and resell points or miles on underground markets. Once inside, fraudsters swiftly redeem or transfer the stolen miles, often selling them on underground markets for profit.
To mitigate this risk, companies should consider implementing redemption limits or delays for large transactions. This strategy provides teams with time to verify the legitimacy of high-value redemptions.
Fake Redemption Schemes
Some fraudsters create elaborate fake redemption schemes. They might establish phony travel agencies or gift card resellers that accept stolen points as payment. Gift card fraud is a bridge between payment fraud and loyalty fraud. Criminals buy a gift card with a stolen credit card, convert that gift card into loyalty points, and then cash out the points.
Businesses should partner with reputable redemption partners and implement rigorous verification processes for new vendors. Regular audits of redemption patterns can also help identify suspicious activity.
Phishing: The Gateway to Fraud
Phishing attacks often serve as the entry point for other types of fraud. Scammers send convincing emails or text messages, tricking members into revealing their login credentials.
Educating members about these risks is essential. Companies should send regular security updates and provide clear guidelines on how they will (and won’t) communicate with members. Implementing email authentication protocols (like DMARC) can reduce the likelihood of spoofed emails reaching members.
Understanding these common scams enables businesses to better protect their loyalty programs and members. A proactive approach to security always proves more effective than reactive measures. In the next section, we’ll explore robust security measures that can fortify your loyalty program against these sophisticated threats.
How to Fortify Your Loyalty Program
At Reward the World, we understand the importance of robust security measures in protecting loyalty programs. Let’s explore some proven strategies to shield your program from sophisticated scams.
Implement Multi-Factor Authentication
Multi-factor authentication (MFA) transforms loyalty program security.
MFA prevents 99.2% of account compromise attacks. You should require MFA for all account logins and high-value transactions. This extra security layer significantly reduces the risk of account takeovers.
Schedule Regular Security Audits
Proactive security audits are essential. Strong policies and regular audits ensure program integrity, identify vulnerabilities and prevent fraudulent behaviors. You should schedule comprehensive audits at least quarterly, focusing on:
- Vulnerability assessments
- Penetration testing
- Access control reviews
- Data encryption practices
Train Your Employees
Your team forms your first line of defense. Cyber breaches impact 46% of businesses with fewer than 1,000 employees. You should develop a robust training program that covers:
- Recognition of phishing attempts
- Proper handling of sensitive data
- Identification of unusual account activity
- Response to suspected fraud
Make training ongoing and interactive. Use real-world scenarios to keep your team sharp and engaged.
Use Advanced Technologies
While blockchain technology shows promise, it’s not yet a silver bullet for loyalty program security. Instead, focus on proven technologies like machine learning and AI. These tools can analyze vast amounts of data in real-time, identifying fraud patterns that humans might miss.
For example, advanced AI algorithms can detect unusual redemption patterns or account access from suspicious locations, flagging potential fraud before it escalates.
Security is an ongoing process, not a one-time fix. Stay informed about emerging threats and continuously adapt your strategies. The next section will explore best practices for customers to protect their loyalty accounts, complementing the robust measures implemented by businesses.
How Customers Can Protect Their Loyalty Accounts
At Reward the World, we believe customer education plays a vital role in preventing loyalty program fraud. While businesses implement robust security measures, members must take action to safeguard their accounts. Here are essential practices every loyalty program member should adopt:
Create Strong, Unique Passwords
Your loyalty account password should match the security of your bank account. Create a distinct, complex password for each loyalty program. Choose random words instead of those in a well-worn dictionary. Cybercriminals often run programs that cross-reference common words, so being unpredictable in your keystrokes is crucial.
A password manager can generate and store strong, unique passwords for all your accounts. The average internet user has 191 passwords to remember (according to LastPass). A password manager eliminates the need to memorize them all while enhancing security.
Turn On Multi-Factor Authentication
Always opt for multi-factor authentication (MFA) when available. This extra security layer significantly reduces unauthorized access risk. More than 99.9% of compromised accounts don’t have MFA, which leaves them vulnerable to password spray, phishing, and password reuse.
Many loyalty programs offer MFA options such as SMS codes, authenticator apps, or biometric verification. Take advantage of these features to strengthen your account security.
Check Your Account Often
Make checking your loyalty account activity a regular habit. Set up account notifications for point accruals, redemptions, and profile changes. This practice helps you quickly spot any suspicious activity.
Loyalty fraud often goes undetected for months because customers check these accounts less frequently than their bank accounts. Don’t fall into this trap. Regular monitoring helps you catch and report fraud early.
Stay Alert to Unsolicited Messages
Phishing attempts often disguise themselves as legitimate communications from loyalty programs. Approach unsolicited emails, texts, or calls asking for your account information with skepticism.
Social engineering attacks customer service representatives by manipulating them into resetting passwords or transferring loyalty points between accounts. Legitimate loyalty programs will never ask for your password via email or phone. When in doubt, contact the program directly using official channels listed on their website.
Report Unusual Activity Quickly
If you notice any unusual activity on your account, report it to the loyalty program immediately. Swift action can prevent further damage and help the program improve its security measures.
Many loyalty programs have dedicated fraud reporting hotlines or email addresses. Save these contact details for quick access in case you need them.
Protecting your loyalty account requires a partnership between you and the program provider. Stay vigilant and proactive in your account security to enjoy the benefits of loyalty programs without falling victim to fraud.
Final Thoughts
Proactive fraud prevention is essential for loyalty programs as threats evolve rapidly. Reward the World’s platform provides top-tier security measures without compromising user experience. Our turnkey solution allows businesses to implement strong security protocols while offering instant reward delivery and a user-friendly interface.
The future of loyalty program security will involve more sophisticated technologies, including artificial intelligence and machine learning. However, employee training and customer education will remain vital components of effective fraud prevention strategies. Reward the World commits to staying at the forefront of these developments, continuously evolving our platform to meet new security challenges.
Reward the World offers businesses a cost-effective way to enhance customer loyalty and boost performance while maintaining high security standards. Our platform (available in 15 languages) serves 250 million users, providing robust fraud prevention measures. We encourage businesses to seek expert help in safeguarding their valuable loyalty ecosystems.