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By4 Min Read
December 21, 2022
A PaymentsJournal article sheds light on some intriguing numbers related to Fraud and Loyalty Programs:
These numbers clearly suggest the magnitude of fraud in loyalty programs and why it can be a cause for concern. As a marketer, fraud in loyalty programs may not be a mission-critical element to running successful campaigns but increasingly, it has become an area that cannot be ignored.
When a customer or a fraudster misuses loyalty points through some tactic or hacks into a system to redeem points, such fraud is termed Loyalty Fraud. There are several ways in which loyalty fraud can happen- sometimes a brand’s employees may be involved, sometimes it can be a hacker who hacks into a system of customer data, and sometimes it can be a group of people colluding to misuse loyalty points.
To give a simple example, consider a situation where a cashier punches his/her own phone number in place of the customer’s and gets possession of the customer’s loyalty points. Apart from this, there are several online forums dedicated to teaching tricks on how to find loopholes in a brand’s loyalty program and take advantage.
There are functional frauds and there are technical loopholes. Loyalty fraud can be classified in the following:
When it comes to reducing the impact of fraud, there are two aspects to look at – detection and prevention.
Fraud detection in loyalty programs is the process of identifying, analyzing, and mitigating fraudulent activity within loyalty programs. It is designed to detect, prevent and respond to any attempts to misuse a loyalty program or earn rewards through fraudulent means. This involves analyzing and monitoring data points such as customer profiles, transaction history, redemption trends, and other behavior patterns to identify suspicious activity.
Fraud prevention in loyalty programs is the process of protecting customer accounts and data from fraudulent activities. This can include measures such as customer identity verification, monitoring customer accounts for suspicious activity, using customer data to identify potential fraud attempts, and using encryption to secure customer data. Fraud prevention in loyalty programs helps to reduce the risk of customer data being stolen or manipulated and helps to protect customer loyalty and trust.
At Capillary, we’ve worked with 250+ enterprise brands across industries which have led us to build several frameworks which can help brands to detect and prevent loyalty fraud.
Our loyalty experts work with brands across the globe to ensure they achieve the maximum from their loyalty programs. Fraud detection is becoming increasingly important in discussions and stringent measures need to be in place to ensure you get the most from your programs.
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