Officials at Maritz Motivation Solutions have been closely monitoring the threat of fraud in loyalty programs. Now, Maritz has taken its concerns a step higher with the introduction of a new LoyaltyNext® Fraud Management Suite, an evolution enabling marketers and brands to detect and prevent fraud in loyalty programs.
Points accumulating in loyalty programs globally are real currencies with increasing value that have attracted the attention of criminals, according to Barry Kirk, vice president of loyalty solutions for Maritz Motivation Solutions. In the U.S. alone, 3.3 billion loyalty program memberships have stored points and miles worth an estimated $48 billion, according to the Gartner Group.
Loyalty program fraud can be perpetrated in a variety of ways, such as hackers stealing credit card and member identity data, or thieves taking points or attempting fraudulent travel redemptions, Kirk said.
The new LoyaltyNext Fraud Management Suite offers multi-level tools for fraud protection which incorporate more than 150 data security rules to:
Analyze data and transactions and assign a rule score to identify the level of threat.
Identify and score the desktop, laptop, smartphone, or tablet used in a transaction to determine if the device has been associated with fraudulent activity.
Provide marketing clients with online and offline analysis of fraud detection reviews.
From January through September of 2016, the LoyaltyNext Fraud Management Suite has stopped more than $1M in fraudulent order transactions in client programs.
Loyalty360 caught up with Kirk and Bryan Phillips, senior vice president of technology, Maritz Motivation Solutions, to find out more about this new fraud prevention tool.
What prompted the development of the LoyaltyNext Fraud Management Suite and how can it help brands prevent fraud in loyalty programs?
Kirk: As a company providing services to many large-scale loyalty programs, Maritz has long been aware of the threat of fraud in loyalty programs, and we’ve had very strict protocols and technologies in place for years to mitigate that risk. But as we've seen the potential threat rise significantly over the last few years, we've recognized our responsibility as an industry leader to continually evolve our fraud strategy to ensure the security of program data. So, our Fraud Management Suite is really just our latest volley in an ongoing battle for secure loyalty programs.
What are brands doing well in this area and where do the challenges lie?
Kirk: I see brands in two verticals taking the lead in this fight -- Financial Services and Hospitality. Frankly, this is out of necessity. These verticals have the largest and most successful loyalty programs in the world, with billions of dollars in value flowing through points and miles. So, their programs are an obvious target for criminals. As a result, they’ve had to be extremely vigilant in monitoring for fraud and moving swiftly when it's discovered.
The weak link at this point isn’t brands, it's consumers. We all know about the risk of fraud on our personal bank accounts and credit cards. We understand the need for strong passwords and for checking transactions frequently for potential fraud. But consumers haven’t come to that same understanding yet about their loyalty program balances. As a result, they aren’t playing their role in staying on top of possible fraud on their own accounts. I think this is going to change in the coming year as more programs allow points to be used more like cash. As paying-with-points becomes more common, consumers will start seeing that their points are just like cash, and their loyalty program balances, therefore, deserve the same level of protection and scrutiny.
Has there been a progression as far as better fraud prevention in this area of loyalty programs?
Kirk: Definitely. The tools available to use to detect potential fraud are far beyond what we had available to us even just a few years ago. More importantly, we’ve simply become smarter about spotting and preventing it. For example, at Maritz, the upside of having to respond to fraud on client programs over the past two years is that we’ve accumulated data to support building out more than 100 rules to anticipate and detect fraudulent activity. This is critical because it means we’re catching and stopping criminal activity before it can directly impact a program member.
Do you think enough brands take this seriously enough to make some hard budgetary decisions and take more preventive measures?
Kirk: I think most brands with loyalty programs are taking the problem seriously, but many of them still aren’t aware of the potential scale that fraud can take or exactly how to address it. It’s also a challenge that many brand loyalty teams are often the last group to get time and attention from their company’s IT staff. So, it’s up to loyalty providers like Maritz to take the lead in advising brands and providing the best tools possible to keep accounts secure. Ask your loyalty provider what their top three priorities are in servicing your program. Security better be in that top three.
From January through September, what common thread (s) did you find related to loyalty program fraud?
Phillips: Things like picking more liquid types of items like gift cards and a large number of them, an IP located in a foreign country and shipping to a U.S. port city and it’s a first-time merchandise redeemer. These types of things are scored and based on that score we can hold or cancel. We work very closely with our client’s fraud teams so we can handle these situations in an appropriate way.