A trusted online identity verification against loyalty fraud

Online fraud comes in many forms, loyalty program fraud is one that frequently goes unmentioned. Fraud targeting customers' loyalty accounts within the retail, travel, and hospitality industry has increased during the covid-19 pandemic. In the aftermath, there are incentives to protect account holders by implementing online identity verification.

Customer relation without ID verification

For consumers, loyalty programs provide added value and a better customer experience. From a business point of view, loyalty programs are about holding on to customers by rewarding those who use the company's services often. Both ends of this customer relation spectrum are being negatively impacted by today's alarming growth in loyalty fraud mainly caused by the low level of identity security. By utilizing identity fraud or leverage a series of brute force attacks, stolen credentials, and automated cyber-attacks criminals gain access to someone’s account and can reap the reward points. Another fraud method is to open multiple accounts under different identities to take advantage of the often-offered signup benefits and then transfer all the points earned from signup to one account for redemption.

Regardless of the method, the criminals' end goal is always monetization, and targeting the obvious loopholes of loyalty programs can be very lucrative. The global loyalty management market was valued at 3,5 billion EUR in 2020 and is expected to reach 12 billion EUR by 2026, according to the Morder Intelligence report. Loyalty fraud is estimated to cost program operators about 1 billion EUR every year.

Loyalty fraud targets the identity unknown

There are many reasons why loyalty programs constitute attractive targets for fraudsters. In matters of protection and security, these programs have lagged compared to other financial services, making loyalty accounts low-hanging fruit to fraudsters. Without a secure and accurate identification process the risk of accounts being compromised lurk at every step of the customer journey, from the sign-up process to the transaction and final redemption of points. Paradoxically, the value and liquidity of reward points have gone up considerably in the last decade as loyalty programs have become more evolved.

Another reason why loyalty fraud is on the rise is the coronavirus pandemic that prompted airlines, hotels, and other loyalty programs to extend the expiration on reward points and such since consumers couldn't use them due to global lockdown. Since loyalty account holders were unable to travel or stay at hotels, they lacked an incentive for checking their account balances. The pandemic lockdown thus created the best of conditions for an account takeover to go unnoticed. For whatever reason, the topic of loyalty fraud repeatedly slips under the radar while other types of fraud vectors generate a lot of attention and news. Meanwhile, many loyalty programs and online services face trust problems since a trusted online identity can't be established without stringent identification requirements reinforcing personal account protection.

ZignSec Online Identity Verification

Online identity verification connects your customers' digital identity to their real-life identity to ensure that customers are who they say they are. Enabling a swift and easy customer onboarding with a high level of identity assurance is essential for all online services. For companies in the financial services industry identity verification serve as a core component to comply with Know Your Customer (KYC) regulations and Anti-Money Laundering (AML) rules. But regardless of digital business, identity verification is crucial to uphold personal account protection and to enable secure customer onboarding since the potential for fraud is especially high during the first interaction with someone registering for a service or opening an account.

ZignSec identity verification is seamlessly integrated into the customer journey, allowing a balance between convenience and security during crucial customer interactions. In the case of loyalty programs, online identity verification could easily be implemented during customer registration, or when the account holders cash out their bonus points and rewards. Loyalty program managers within the retail, travel and hospitality industry that connect with ZignSec are capable of verifying the identity of any user worldwide. Via a single interface, we grant your company access to a comprehensive range of the solutions available globally, giving you the capacity to swiftly and accurately identify customers regardless of what type of ID document they use.