Loyalty Card Fraud – What It Could Mean For Your Business

Fraud is a serious problem as technology provides an increasing range of methods by which fraudsters and criminals can relieve us of our hard earned cash. Loyalty schemes are enormously popular and many businesses across a whole range of sectors use these schemes in order to offer incentives to repeat buy from their brand. While many see loyalty schemes as risk free for businesses, should a fraud take place there can be some very tangible consequences in terms of material loss.

What is loyalty card fraud?

Although no cash is changing hands when it comes to loyalty card fraud, there is the possibility for fraudsters to create enough value in a card to make some pretty significant store purchases. Now that most schemes have gone digital, there are more opportunities to rig IT systems to allocate points where they shouldn’t be. For example, last year it was reported that Chomchanok Hongsakuulvasu, an employee of luxury London department store Harrods, scammed the store out of 850,000 Reward Card points – the equivalent of a £250,000 spend in store. Had she used the points to purchase anything she could have spent up to £3,000.

Stealing points from customers

While there are obvious consequences for businesses where fraudsters are directly targeting the accrual of points for themselves, there have also been some well documented cases where criminals have targeted points already accrued by other customers. A major issue with this sort of fraud is that unless reported by customers it is often unrecognized or exposed, not to mention the fact that, to an outside observer it can be easily defined as victimless, however in the hands of highly organised crime syndicate, it can be massively exploited with multiple transactions. Points make prizes.

How does loyalty card fraud happen?

There are a number of different ways in which points can be fraudulently obtained, from employees working inside an organisation to fraudsters exploiting vulnerabilities in retailers’ platforms, directly targeting people and putting together information to launch an attack from third-party sites. In the past year a number of very well established businesses have been the target of loyalty card fraud, including Subway and American Airlines, so no business is immune.

What action can you take?

ITC is running a loyalty card fraud forum for managers to discuss security, which is specifically tailored towards companies who offer customer reward schemes. The forum covers topics such as trends in fraud techniques, and is designed to foster cross company collaboration to increase understanding and help reduce risks. For more information on the forum, please get in touch.