BLOYL Customer loyalty Platform
Enterprise customer loyalty platform for engagement, promotions, and rewards
Loyalty Fraud: Stop Program Abuse Before It Costs You
Loyalty programs are designed to drive engagement, repeat behaviour, and long-term value.
But when fraud enters the picture, those same programs can quickly become a liability.
Loyalty fraud erodes margin, undermines trust, and damages the very relationships loyalty programs are meant to protect. For marketers responsible for retention and customer experience, fraud prevention is no longer a back-office concern. It is a core part of program integrity and brand credibility.
“A loyalty program only works if customers trust it. Once that trust is broken, recovery is far more expensive than prevention.”
— Chris Galloway, EVP Strategy & Design, Brandmovers
What Loyalty Fraud Really Looks Like
Loyalty fraud occurs when individuals or organised groups manipulate a program to earn, steal, or redeem rewards illegitimately.
Unlike payment fraud, loyalty abuse often goes unnoticed for extended periods. Points do not trigger the same alerts as credit cards. Many customers check their balances infrequently. That delay gives fraudsters time to extract value quietly.
What once looked like isolated abuse has evolved into repeatable, automated activity that scales across thousands of accounts.
For brands, the cost is not just lost rewards.
It includes operational overhead, customer service impact, program devaluation, and reputational damage.
Why Loyalty Programs Are Attractive Targets
Fraudsters focus on loyalty programs for three consistent reasons.
Points behave like currency
Rewards can be exchanged for products, services, vouchers, or transferred to other accounts. That makes points a liquid asset with resale value.
Once converted, recovery is difficult.
Detection is often delayed
Customers monitor bank accounts closely. Loyalty balances receive far less attention.
Dormant or low-engagement accounts are especially vulnerable.
Security is historically weaker
Many loyalty programs were built as marketing platforms, not financial systems.
That often means lighter authentication, limited monitoring, and fewer controls around redemptions and transfers.
“The biggest fraud risks appear when loyalty is treated purely as a marketing channel instead of a value system that needs protection.”
— Chris Galloway, EVP Strategy & Design, Brandmovers
The Most Common Types of Loyalty Fraud
Account takeover (ATO)
Account takeover is the most common form of loyalty fraud.
Fraudsters gain access to legitimate member accounts and redeem or transfer rewards before the customer notices. This often involves reused credentials, phishing, or social engineering.
ATO is damaging because it directly affects real customers and trust.
Fake accounts and sign-up abuse
Fraudsters create large volumes of false accounts to exploit welcome bonuses, referral incentives, or promotional offers.
Without proper registration controls, programs unintentionally fund this abuse themselves.
Points manipulation and exploitation
Some attacks exploit logic flaws rather than stolen accounts.
This includes duplicate point credits, abuse of return policies, or manipulation of earn rules that were not designed to handle scale or automation.
Internal abuse
Employees with system access can exploit loyalty infrastructure if controls are weak.
Internal fraud often goes undetected longer because the activity appears “legitimate” within the system.
Early Warning Signs Marketers Should Watch
Loyalty fraud rarely appears without signals.
The key is knowing what to monitor.
Account-level indicators
- Dormant accounts suddenly becoming active
- Rapid changes to account details followed by redemptions
- Login activity from unexpected locations
- Large balance redemptions shortly after password resets
Transaction-level indicators
- Unusually fast redemption velocity
- Repeated high-value redemptions
- Transfers between newly created or related accounts
- Behaviour that deviates from historical patterns
Program-level indicators
- Sudden spikes in account registrations
- Referral activity that does not match natural customer behaviour
- Increased complaints about missing points or unauthorised activity
“Fraud prevention works best when brands treat unusual behaviour as a signal to investigate, not a problem to explain away.”
— Chris Galloway, EVP Strategy & Design, Brandmovers
Designing Loyalty Programs That Are Harder to Abuse
Fraud prevention should be built into program design, not bolted on later.
Strengthen access and authentication
Layered authentication, risk-based login challenges, and device recognition reduce account takeover risk without adding unnecessary friction.
Control registration and onboarding
Email verification, phone validation, and device checks reduce fake account creation at the source.
Monitor behaviour continuously
Behavioural analytics are more effective than static rules. Monitoring patterns over time makes it easier to spot anomalies before abuse escalates.
Introduce smart redemption controls
Delays, caps, tier-based access, and verification requirements limit how quickly fraudsters can extract value.
Treat dormant accounts as high risk
Inactive accounts are attractive targets. Requiring extra verification when dormant accounts are reactivated significantly reduces exposure.
Case Study: Manufacturer Distributor Loyalty Program — B2B Channel Incentives Increased Engagement
Fraud risk increases when loyalty programs lack structure, visibility, and behavioural insight. In this manufacturer–distributor environment, Brandmovers addressed those risks by designing a structured B2B loyalty program that reinforced legitimate participation while improving transparency.
The manufacturer operated through fragmented distributor channels with limited visibility into partner activity. Low engagement and inconsistent participation made it difficult to distinguish healthy behaviour from potential abuse, increasing exposure to misuse and inefficiency.
Brandmovers implemented a points-based B2B loyalty and channel incentives program using the BENGAGED™ B2B Loyalty Platform. The solution rewarded verified distributor purchases and engagement actions, creating a clear value exchange tied directly to real business behaviour. Centralised reporting improved visibility across the channel, reducing blind spots that often enable abuse.
Key elements included distributor segmentation, tiered incentives, automated communications, and analytics dashboards that tracked participation and progression in real time. Purchase-based points earning and structured rewards helped reinforce repeat, legitimate behaviour while discouraging opportunistic misuse.
The program delivered improved engagement and stronger channel relationships, supported by measurable participation lift and sustained activity. For loyalty teams, the takeaway is clear: structured engagement and visibility are foundational not just for growth, but for reducing program abuse.
Case Study: Metrolink Consumer Transit Loyalty Program Increased Rider Engagement
Consumer loyalty programs face similar fraud risks when engagement is low and account activity is inconsistent. Metrolink needed to modernise rider engagement while creating clearer visibility into participation and behaviour.
Repeat engagement outside routine commuting was limited, and there was minimal insight into individual rider behaviour. That lack of visibility increases fraud exposure by making abnormal activity harder to detect.
Brandmovers implemented a consumer-facing loyalty program using the BLOYL™ Enterprise Loyalty Platform. The program rewarded verified ridership and engagement behaviours through a points-based structure, supported by segmentation, dashboards, and analytics.
By creating clear behavioural pathways and measurable participation, Metrolink gained stronger insight into account activity patterns. This structure supports both engagement growth and fraud detection by establishing what “normal” behaviour looks like across rider segments.
The program demonstrated sustained engagement in a non-traditional loyalty category and reinforced the importance of visibility and structure as foundations for program integrity.
URL: https://www.brandmovers.com/metrolink-consumer-transit-loyalty-program-brandmovers
Turning Fraud Prevention Into a Loyalty Advantage
The strongest loyalty programs balance ease of use with protection.
Fraud prevention should not feel punitive to legitimate members.
When designed well, it reinforces trust, transparency, and fairness.
Programs that actively protect member value send a clear signal: loyalty is respected here.
About Brandmovers
Brandmovers helps organisations design and operate loyalty programs that drive engagement while protecting program integrity.
With over 20 years of expertise and the BENGAGED ™ B2B loyalty platform, Brandmovers enables brands to monitor behaviour, prevent abuse, and build loyalty ecosystems that customers trust and value.
Request a demo to see how Brandmovers can help your organisation apply these strategies in practice.