by Leo Jakobson | November 23, 2016

Companies of all sizes have enormous sums tied up in consumer incentive loyalty program points, yet the customers who have earned those points take security nearly as seriously as they should, according to Maritz Motivation Solutions.

As much as $48 billion worth of points and airline miles are unredeemed, according to the company, which just released its LoyaltyNext Fraud Management Suite, a next-generation set of tools to proactively detect and protect against fraud. During its "soft launch" in the first nine months of the year, LoyaltyNext detected more than $1 million worth of attempted fraud.

"We should be treating loyalty points like bank accounts," says Barry Kirk, Maritz's vice president of loyalty solutions. "Fraud needs to be a top priority."

While program participants' personal information and credit cards associated with loyalty program accounts are part of this, the real area of concern is large-scale hacks that seek to access and redeem programs members' points to redeem for electronic and physical gift cards, merchandise, and even -- particularly in countries with laxer airport security -- plane tickets. 

"Fraud has a significant impact on loyalty budgets," says Kirk. "It means marketers are essentially paying twice for redemptions, and it tarnishes your brand image with customers."


That is why it is vital to convince consumers to take loyalty program account protection seriously, Kirk says. "Consumers have been aware of the danger of fraud and identity theft via their personal bank accounts for years, but they are only just now beginning to realize that loyalty currency is real money and needs the same level of protection as any of their financial accounts," he notes. 

This is becoming more urgent as a growing number of large loyalty programs by companies like Citibank, American Express, and MasterCard allow program members to use points pay for things directly at the cash register.

Fraud prevention should cover three areas, Kirk adds. The first is Intrusion protection, so the company knows when a hack is being attempted. "If you have a loyalty program and you're not seeing at least weekly attempts to hack in, you're not paying attention," he says.

Second is creating program rules that make it easier to scan for signs of fraud -- in the way credit card issuers often spot fraudulent transactions and inform the card-holder before they show up on a bill. Better rules can also help with an area that many in the consumer loyalty industry describe using the term "fraud" but which is decidedly not criminal: finding loopholes and poor rules in program rules that allow them to earn far more points than intended, he notes

Third comes doing a better job of vetting the people who manage loyalty programs and have access to points -- from program managers to call-center employees.