Loyalty programmes have become a powerful tool for customer engagement and retention across sectors like travel, hospitality, and retail. However, the growing sophistication of these programmes also makes them attractive targets for fraud. Fraud in loyalty programmes is on the rise, threatening brand trust and customer satisfaction. With global losses nearing $3 billion annually, businesses must focus on loyalty fraud detection and prevention – not as a reactive measure but as a strategic priority.
Understanding loyalty fraud
Loyalty fraud occurs when individuals or groups exploit vulnerabilities in a loyalty programme to gain unearned benefits. It affects both businesses and customers – damaging brand reputation, eroding customer trust, and causing financial loss.
Some of the most common forms of loyalty fraud include:
- Data breaches and plastic card fraud
- Account takeover and spoofing
- Loyalty point hacking and reward exploitation
- Redemption fraud, policy abuse, and status gaming
- Fake member enrolments and new account fraud
- Impersonation and retro claims
- Partner abuse, agency pooling, and mileage resale
- Diversion fraud
As loyalty schemes evolve, so do the fraudsters’ exploitation tactics. Travel and hospitality brands, in particular, face high exposure due to the perceived value of their rewards and the ease of reselling and misuse.
Loyalty fraud detection: Warning signs
Recognising early signals of suspicious activity is key to proactive loyalty fraud detection. Monitoring for the following patterns can help ensure stronger loyalty fraud prevention:[1]
- Unusual account activity patterns: Repeated logins from different devices or locations may signal a compromised account.
- Suspicious loyalty points movement: Large, unexpected points transfers or balance drops without customer engagement can indicate misuse.
- Authentication failure patterns: Frequent failed login attempts or password resets could suggest credential stuffing or brute-force attacks.
- Irregular redemption behaviours: High-value redemptions shortly after point accrual or sudden spikes in claims hint at potential fraud.
Strengthening loyalty fraud detection in travel and hospitality
Robust loyalty security programmes require more than just technology – it demands the right combination of secure design, informed people, and streamlined processes. Here is how travel and hospitality businesses can strengthen their defence against loyalty fraud:
Fortify user authentication and access control
Start with the basics – secure all touchpoints. Implement strong login protocols using multi-factor authentication, captchas, and robust password policies. Limit code usage and cap redemption attempts to reduce exposure.
Build a culture of awareness and accountability
Loyalty fraud prevention is a shared responsibility. Educate customers on the value of their accounts and the risks of social engineering. Equip your staff with training to spot and respond to threats while promoting a transparent, security-first culture.
Redesign programme rules for security
Operational tweaks can make fraud harder to execute. Delay point redemptions, limit return and refund windows, and cap point usage within set timeframes to reduce fraud opportunities.
Adopt advanced technology for real-time detection
Use secure platforms that integrate loyalty fraud detection tools and breach monitoring. Modern systems can detect anomalies using machine learning, flag high-risk transactions, and isolate affected accounts instantly.
Tailor workflows to detect anomalies
Customise workflows to set fraud triggers based on behavioural patterns. This helps isolate suspicious activities early and apply corrective action with precision.
Minimise internal access to critical systems
Internal fraud is often one of the most overlooked aspects when it comes to loyalty fraud detection. Limit back-end access to only essential personnel and audit privilege levels regularly to ensure effective loyalty fraud prevention.
Monitor, audit, and evolve your loyalty security programme
Continuous monitoring is non-negotiable when building a loyalty security programme. Deploy fraud monitoring software, run regular audits, and update account security protocols to stay ahead of evolving threats.
Infosys BPM offers end-to-end loyalty fraud detection and prevention services tailored for modern travel and hospitality businesses. From fraud analytics to AI-driven monitoring, these solutions help brands reduce losses, improve operational resilience, and protect customer loyalty. Combining deep domain expertise with cutting-edge technology, Infosys BPM helps businesses build a future-ready prevention framework, supporting real-time detection, streamlining investigations, and improving fraud response strategies. As loyalty programmes expand, their vulnerabilities grow as well. Infosys BPM helps businesses stay ahead through smarter loyalty fraud prevention, seamless integration of detection tools, and scalable security solutions.
Conclusion
Loyalty programmes offer immense value to both businesses and their customers – but only when effective safeguards and loyalty fraud prevention measures are in place. As fraudsters evolve their tactics, businesses must respond with smarter, more agile defences. From identifying early warning signs to strengthening processes and adopting advanced technologies, every layer of protection matters. Businesses that invest in proactive loyalty fraud detection and prevention are better positioned to not only mitigate risks but also deliver stronger, safer customer experiences that drive long-term loyalty. While there is no one-size-fits-all approach, a well-designed loyalty security program that combines secure technology, customer education, and vigilant monitoring can make all the difference.
