Reward programs have evolved into high-value digital assets—rich with customer data, stored value, and strategic potential. But wherever there’s value, there’s vulnerability.
Loyalty fraud is growing rapidly, undermining trust, damaging reputations, and siphoning millions from brands across industries. Whether you’re running a program in travel, retail, or grocery, if points are involved, so is risk.
Whether it’s stolen credentials or sophisticated reward system exploits, loyalty fraud is no longer a rare occurrence—it’s a recurring threat with multimillion-dollar consequences. And yet, many brands still treat it as an afterthought. That mindset has to change.
Why Loyalty Programs Are a Prime Target
With billions of dollars in stored value across points-based programs, fraudsters view loyalty platforms as virtual banks—rich in opportunity, but often lacking robust defenses.
Airline miles, hotel points, coffee shop punch cards—loyalty programs are everywhere, and their popularity show so signs of slowing. In 2023, the global loyalty management market was valued at $11.31 billion and is projected to quadruple by 2032. It’s no surprise why: when done well, loyalty programs drive customer engagement, deepen brand relationships, and fuel repeat purchases.
But that same success has made these programs increasingly attractive to cybercriminals. According to Statista, loyalty fraud now accounts for 31% of all fraud attempts against online merchants as fraudsters know that millions of dollars in loyalty currency are stored in customer accounts
In the airline industry alone, loyalty fraud is estimated to cost over $1 billion annually. And across industries, brands are discovering that fraud isn’t limited to high-traffic programs or major players. Any business offering a rewards system—whether it’s built on points, perks, or status—is at risk.
One of the most concerning trends is the sheer number of dormant or unattended accounts. In fact, more than half of all loyalty accounts show no regular activity. While that might seem harmless at first, it means there’s often no customer watching for unauthorized logins, changed information, or suspicious redemptions. It’s the perfect environment for exploitation.
Two Core Types of Loyalty Fraud
Not all fraud looks the same. In loyalty programs, there are two dominant attack strategies: account takeovers and point bank manipulation.
Account takeovers involve bad actors using stolen credentials—often gathered through data breaches unrelated to your brand—to log into a loyalty account, change personal details, and redeem points. These breaches are often automated, with bots rapidly testing password combinations until they find one that works. Once inside, the attacker can drain an account before the rightful member even notices.
Point bank manipulation, on the other hand, is more calculated. Fraudsters sign up for accounts and behave like real users—at least initially. Over time, they probe the system, looking for logical loopholes or latency issues they can exploit.
This was the case at Giant Food, where attackers discovered they could initiate multiple gas reward redemptions in the milliseconds before point balances updated. In doing so, they drained the system for over $10,000 a day, using specially outfitted trucks to collect and resell fuel obtained through fraudulent means, according to Ryan Draude, Head of Loyalty at Giant Food, during his presentation at the 2025 Loyalty Expo.
Why Brands Often Miss the Warning Signs
Despite the scale of the threat, loyalty fraud frequently goes undetected—at least at first. That’s partly because loyalty teams are typically focused on growth, engagement, and revenue. Fraud prevention, if it’s on the radar at all, tends to be treated as someone else’s responsibility—usually IT or compliance.
In reality, fraud doesn’t always announce itself in a neat data report. In the Giant Food example, it wasn’t analytics dashboards that caught the issue—it was people. Call center agents noticed customers complaining about missing points or locked accounts. Franchisees reported unusual guests. Store clerks spotted unfamiliar behavior. These frontline observations—often dismissed as outliers—were early warning signs.
By the time the data reflected the damage, the fraud had already cost millions.
How to Fight Back: A Smarter Approach to Fraud Defense
Combating loyalty fraud doesn’t require a complete overhaul, but it does require a shift in mindset. The most effective programs adopt a layered defense strategy that blends awareness, analytics, and well-placed technical safeguards.
First, communication across departments is critical. Loyalty teams need to be in regular contact with customer service, IT, fraud prevention, and even retail operations. Feedback from call centers, customer-facing staff, or store associates can provide the first clue that something’s off. Those conversations should be encouraged—not seen as distractions.
Next, brands must develop a more fraud-aware lens when reviewing performance data. It’s not just about tracking redemptions and KPIs. Unusual earn-to-redeem ratios, redemption “velocity” spikes, or traffic from suspicious IP addresses are all potential red flags. With the right monitoring in place, brands can identify abnormalities and investigate before the losses escalate.
Finally, adding “speed bumps” into your platform can make a huge difference. Multi-factor authentication, CAPTCHA challenges, and email alerts for account changes might seem simple, but they significantly increase the cost of attack for fraudsters. Implementing point deduction pauses and daily redemption caps helped stop their attackers cold.
How Switchfly Helps Loyalty Programs Stay Secure
At Switchfly, we believe that loyalty and security go hand in hand. That’s why our platform is designed with enterprise-grade protection built in—not bolted on.
We are SOC 2 Type 1 certified, which means we adhere to strict standards around data security, system availability, and privacy. As a PCI-compliant platform, we also handle payment and credit card data with the highest level of care and encryption.
To safeguard loyalty transactions, we integrate 3D Secure authentication through leading payment partners like Worldpay. This adds an additional verification layer during e-commerce bookings, protecting against unauthorized redemptions.
But our fraud protection doesn’t stop at checkout. We also employ real-time verification of point balances and transaction behaviors—particularly useful in multi-tab or multi-device shopping scenarios where loyalty abuse can easily slip through the cracks. Our SSL encryption and continuous vulnerability scanning ensure that defenses evolve alongside emerging threats.
In short, Switchfly gives loyalty programs the ability to grow and scale without sacrificing trust or security.
When to Bring in the Experts
Sometimes, internal teams simply don’t have the bandwidth or tools to manage loyalty fraud on their own. That’s where third-party solutions come in. Specialized fraud vendors offer machine learning models, real-time pattern recognition, and pressure testing for your platform’s rules and logic.
If you’re seeing strange activity—or just want peace of mind—it may be time to evaluate whether an external partner can offer the coverage you need.
Loyalty Without Vigilance Is Risky Business
Loyalty fraud isn’t a possibility—it’s a reality. And as reward programs grow in complexity and value, so does the creativity and persistence of those trying to exploit them.
But the fight isn’t lost. Brands that acknowledge the threat, stay curious, and commit to continuous improvement are far better positioned to protect both their customers and their bottom line. Whether you’re using internal resources or external partners—your ability to prevent fraud is directly tied to how seriously you take it.
