Loyalty programs continually grapple with sophisticated fraudsters seeking to exploit system weaknesses for personal gain. Among these threats, join bonus fraud can be a critical concern for program operators and loyalty consultants, necessitating robust prevention strategies.
Significant risks associated with Join Bonus Fraud
Join bonus fraud, a subset of loyalty program fraud, involves the creation of multiple accounts using falsified information or duplicate email addresses to repeatedly access initial membership bonuses. This practice falls under the broader category of loyalty fraud, defined as the deliberate use of deception to secure unfair advantages from loyalty programs.
One quick-service restaurant (QSR) brand learned a difficult lesson because of poor program design. Members were rewarded with sufficient bonus points when they joined the loyalty program to redeem for a free item. This was intended to encourage mass registrations and provide a delight to the new member. Unfortunately, fraudsters exploited the design by creating an account, earning the bonus points, redeeming for a free item, then deleting their account and starting the process again.
The mitigation to fix the vulnerability was relatively simple; the QSR implemented mobile phone number verification as part of the registration process such that a member could not delete an account and create a new one using the same mobile number.
The risks associated with join bonus fraud are multifaceted and potentially costly. Fraudsters can create numerous fake accounts, leading to significant financial losses for program operators, especially those offering generous join bonuses. This fraudulent activity can dilute the value of points or rewards for legitimate members, eroding the program’s overall integrity.
Lastly, the operational strain of managing and investigating fraudulent accounts can overwhelm program resources.
Mitigation strategies to combat Join Bonus Fraud
As with the QSR, join bonus fraud can be mitigated very effectively via a comprehensive suite of prevention and detection measures. Offering modest join bonuses that provide just enough incentive to initiate a member’s redemption journey without attracting fraudsters is a crucial first step. In some instances, restricting point transfers, particularly for new accounts, can deter fraudulent activity.
Implementing robust verification processes is essential. This includes limiting one membership to one mobile phone number and enhancing Know Your Customer (KYC) protocols during the join process. Leveraging anti-fraud technology to verify email addresses and other credentials as part of an automated background check can significantly bolster security measures.
Program operators should consider releasing join bonuses gradually or after certain activity thresholds are met, rather than all at once. This approach can discourage fraudsters seeking immediate gains while rewarding genuine, loyal members. By combining these strategies, loyalty programs can create a more resilient defense against join bonus fraud, safeguarding their financial interests and maintaining the integrity of their offerings for legitimate members.
As loyalty program fraud continues to evolve, it is imperative for program operators to remain observant and adaptive in their approach to fraud prevention and detection. By prioritizing these security measures, loyalty programs can protect their valuable assets, maintain member trust, and ensure long-term program sustainability.
Conclusion
To protect loyalty programs from join bonus fraud, a multi-faceted approach is essential. Robust monitoring systems are crucial for detecting suspicious patterns, such as multiple accounts originating from a single IP address. These systems should employ advanced analytics to identify anomalies indicative of fraudulent activity. Additionally, clearly articulated terms and conditions serve as a deterrent, explicitly stating that fraudulent behaviour will result in account termination and reward forfeiture.
As loyalty program fraud continues to evolve, staying informed and proactive is crucial for program operators and members alike.
Loyalty & Reward Co offers comprehensive insights on various aspects of loyalty program fraud, providing valuable strategies for safeguarding your program. For personalized advice on protecting your loyalty program from join bonus fraud and other security threats, we encourage you to consult with our team of loyalty experts.
Acknowledgement
Thank you to Michael Smith, co-founder of the Loyalty Security Alliance and contributor to ‘Loyalty Programs: The Complete Guide’, whose expertise helped inform insights presented in this article.
References
- Loyalty Security Association. (2023). Best Practices for Loyalty Program Security.
- Data Protection Commission. (2021). Annual Report on Data Breaches in the Travel Industry.
- Loyalty & Reward Co. (2024). Best Practices in Loyalty Program Security.
- Shelper, P (2023). Loyalty Programs; The Complete Guide: Edition 2
