As a professional organization, the LFPA will help loyalty programs understand loyalty fraud prevention and, serve as a resource and central database for known loyalty fraudsters, establish best practices for preventing fraud, and educate loyalty program members via workshops and conferences.
Fraudulent cash-like exploits of loyalty points and airline miles have existed for a number of years on the “earn” side of equation, according to Webster, but emerging fraud patterns include outright data breaches and account take-overs on the “burn” (or redemption) side of points and miles. Vulnerabilities are likely to increase as loyalty programs, currencies and transactions shift from membership cards and websites to smartphones and the mobile environment.
Industry Stakeholders Unite to Combat Fraud
In addition to global publicity about breaches of major hotel and airline rewards programs in recent years, a 2015 “hackathon” sponsored by United Airlines illustrated the extent of the loyalty fraud problem. The hackathon winner earned one million miles by identifying 20 potential weaknesses in United’s loyalty system.
These kinds of breaches devalue the loyalty programs themselves and can result in lost miles and points for thousands and millions of program members, Webster explains. One of the major challenges, he points out, is that members often do not treat their points and miles as forms of currency, nor do they treat their loyalty accounts as bank accounts. As a result, compromises or hacks often go unnoticed until it is too late to recover valuable lost miles or points.
Ai Co-Founder Christopher Staab points out this his firm, which specializes in airline research and conferences, has offered loyalty fraud workshops for several years to raise awareness of the growing incidence of fraud.
Initiative Tackles “A Growing Phenomenon”
“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.
As part of its mission and objectives, LFPA will:
- Serve as a central resource for loyalty fraud prevention
- Establish and share best practices to stop loyalty program fraud
- Serve as an online resource for loyalty fraud prevention professionals
- Establish a central online database of known fraudsters
- Provide training on fraud prevention
- Provide training on loyalty program security and protection
- Organize regional workshops and an annual conference to discuss fraud-related issues
Peter Maeder, LFPA’s membership secretary, says the association’s primary objective is to provide industry professionals a platform to exchange experiences and learn from one another. To help achieve this objective, LFPA’s inaugural conference on combatting loyalty fraud will be held November 9-10, 2016, in London.