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December 16, 2020 - Akshay Sharma

4 Ways to Protect Your Loyalty Program from Fraud

No business ventures into a loyalty program hoping it will fail. But what happens when your loyalty program is working beyond your greatest expectations? The truth: all those seemingly loyal fans might not be what, or who, they seem.

Loyalty fraud occurs when a person exploits or abuses your program for personal gain or criminal activity. According to Gartner research, roughly $140 billion in loyalty points go unused each year, and it’s estimated that $3.1 billion worth of points redeemed are fraudulent. Maintaining active fraud detection and prevention is key to not only stopping fraud but also preserving the integrity of your program for legitimate customers. 

Here are some ways you can protect your loyalty program from fraud, along with your profits and reputation.

1. Build Richer User Identities

The more you know about each customer, the better you can compare profiles and weed out the duplicates. For example, you might have multiple email addresses trying to claim the same reward, but each one may be tied to the same mailing address. 

DataVisor’s comprehensive fraud detection platform takes this idea a few layers deeper by analyzing connections between multiple data points at scale. Not only can companies view basic profile information like name, address, and email, but they can also gain insight into IP addresses, device IDs, and more. In addition, DataVisor’s platform creates a visual illustration of how these elements are connected and makes it easy to take bulk actions on fraudulent activities before transactions are completed. 

2. Personalize the Customer Experience

Using coupon codes for rewards is a common theme in today’s loyalty programs. But given the speed at which information is shared, coupon codes can easily be found online and exploited for personal gain. It’s best practice to generate personalized codes at the user level and create start and end dates so that redemptions can easily be traced back to the source. This also makes it easier to dissolve codes that are showing signs of abuse and mitigate your losses.

3. Track Every Redemption

From a marketing perspective, it’s important to know redemption metrics to see how well your program is working. For example, you’ll want to know how much your promotional campaign costs you and compare how much revenue it earned vs. what you spent.

Personalizing the customer experience can help improve redemption tracking and identify potential gaps for exploitation.

4. Improve Fraud Detection with Machine Learning

Using automated monitoring tools for fraud detection and prevention takes much of the manual review out of the process and can help companies view loyalty program activities at scale. Platforms like DataVisor can identify red flags in real time, such as duplicate user profile details, canceled orders, or orders with very high or low values that could indicate fraud, and allow you to take action in the moment before it can impact your bottom line.

When you have strong fraud prevention tools in place, you can reward loyal customers with confidence that your program isn’t being exploited or abused.  Learn how to prevent promotion fraud and grow your customer base with DataVisor’s comprehensive fraud detection platform.


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about Akshay Sharma
Akshay Sharma is a Solutions Architect at DataVisor.