Loyalty Program Blind Spots Hinder the Fight Against Fraud

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Fraud protection programs and consumer education remain essential in the battle against data breaches and the threat of theft.
Customer Experience

Loyalty programs are designed to reward consumers' buying behaviors, enabling patrons to earn points toward future purchases as they shop. Yet, while most are aware of the benefits behind such programs, few consumers understand how the potential for loyalty fraud could compromise their hard-earned rewards in the future.

Connexions Loyalty's recent "Loyalty Program Fraud" report reveals how consumers' loyalty program blind spot may leave them susceptible to deceit. Conducted in partnership with Ipsos Public Affairs, the study polled more than 1,600 shoppers who are members of at least one loyalty program to evaluate how member mindset aligns with their actions. Despite the fact that 81 percent of Americans equate loyalty and rewards points with cash, the same percentage has never thought about potentially becoming the victim of the fraudulent activity that's infiltrated many high-profile loyalty card programs. Instead, these individuals remain indifferent because most assume that the companies in charge of such programs will protect them from any impending threats.

The following statistics examine current program member behaviors and perceptions within the loyalty space:

  • Most consumers rarely monitor their accounts, but 26 percent would leave the loyalty program in the event of a data breach and 17 percent would stop doing business with the organization entirely.
  • When it comes to worrying about reward program fraud, only one in 10 respondents 'agree strongly' with this looming concern, while another 21 percent 'somewhat agree' with the sentiment. However, men (36 percent) and 40 percent more likely than women (26 percent) to fret over such threats.
  • Overall, 37 percent of those polled treat reward points as 'found money' that allows them to purchase items they want, while 36 percent cash in these points for items they need and 10 percent apply these points to the purchase of gifts for others. Only 16 percent find little to no value in their loyalty points.
  • On average, 34 percent of program members log into their loyalty accounts once every few months at most, while 10 percent never check their account balances. Only 9 percent screen their accounts daily.
  • Young adults are most likely to leave such programs (30 percent) or take their business elsewhere (20 percent) after an incident of loyalty fraud. One-third of all respondents, however, expect the company to replace their rewards points, while 22 percent expect reimbursement and additional compensation.
  • Members would remain loyal if the company implemented a fraud protection program in response to such a breach, while 37 percent of total respondents-and 43 percent of younger consumers aged 18-34-would take it upon themselves to tell others about their accounts being exposed to fraud.

Key takeaway: Ninety-three percent of respondents believe all rewards programs should have fraud protection in place. However, such measures are only part of the solution, as increased program value will inevitably spark an increase in criminal activity. Therefore, along with these protective measures, companies must also educate consumers on potential program vulnerabilities and ways to safeguard their accounts. Ultimately, protection comes down to joint responsibility, for both loyalty members and program owners must each do their part to monitor activity and report possible threats. Consumers would maintain this high level of vigilance with regard to personal banking accounts. Thus, those who equate rewards points with cash must take the same stance to protect their interests. In today's vulnerable environment, companies and consumers can never be too careful when it comes to enacting safety measures and behaviors. Fighting fraud will always require involved parties to be one step ahead of those who pose the greatest threat.

EXPERT OPINION
EXPERT OPINION