There was a time when loyalty fraud was almost a punchline; after all, in a world of electronic bank accounts and online credit card information, why would a hacker instead go after something like frequent flier miles?
 
As the customer loyalty industry continues to grow into a marketing powerhouse, however, the number of unused (and therefore, unmissed) points began to skyrocket alongside the trend of providing a direct points-to-cash conversion, thanks in part to “points plus cash” options included in many loyalty programs. Somewhere along the way, this punchline turned into a legitimate threat, and loyalty fraud was born.
 
Until now, companies have relied solely upon their own measures to prevent this fraud, with no unifying body to assist in this kind of security. The recent formation of the LFPA (Loyalty Fraud Prevention Association) gives credence to the threat of loyalty theft and aims to be the resource that had been sorely lacking in the sector.
 
The association consists of a collection of stakeholders in the loyalty industry, including Airline Information (Ai), a leader in commercial aviation conferences. Ai is an appropriate choice given its industry expertise, as is the founding president, Iain Webster. Webster was previously a senior executive at the loyalty programs of both British Airways and Qatar Airways.
 
Airlines are often the companies most targeted by fraud, due to their traditional “earn-and-burn” point acquisition and redemption models. In addition to this, customers are still coming around to the concept of treating loyalty points as a direct currency, resulting in haphazard monitoring of these points and late notice of potential fraudulent activity.
 
Besides the obvious loss of value to the customer, this type of fraud devalues the loyalty program itself, resulting in damage to the perception of the brand whose program was breached.
 
Ai co-founder Christopher Staab chimed in regarding the formation of the association, and the goals of the group as it pertains to fraud prevention.
 
“In response to repeated requests for help stemming from these efforts, we have decided to bring together stakeholders from a variety of industries that offer loyalty programs and establish a formal group to support the fight against this growing phenomenon,” Staab says.

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