UPDATE: The landscape of loyalty fraud has shifted dramatically, with losses now estimated between $1 billion and $3 billion annually, according to new data from the Digital Trust Index 2025 released by Sift. This alarming trend underscores a growing threat as cybercriminals increasingly target loyalty programs, which have become digital currencies in their own right.
Loyalty programs, once seen as harmless marketing tools, have transformed into lucrative targets for fraudsters. Igor Litovsky, Founder and CTO of Mastermind Loyalty, warns that consumer exposure to online fraud has surged by 89% compared to the previous year. “These points, bonuses, and miles represent real value,” Litovsky stated. “Yet they are often protected less rigorously than cash accounts,” he added.
The urgency of the situation is compounded by a systemic vulnerability in how loyalty programs are structured. Companies typically view these rewards as marketing promotions rather than financial assets, leading to a lack of stringent risk controls. “With multiple stakeholders involved—such as banks and fulfillment centers—there are numerous entry points for attacks,” Litovsky explained.
In a world where digital transactions occur at lightning speed, attackers are exploiting synchronization gaps between systems. The moment a customer completes a purchase, their new point balance is instantly available, often before adequate risk controls can react. This narrow time window allows fraudsters to initiate rapid redemptions or manipulate balances without detection.
The use of AI and bots by attackers has further escalated the threat. These tools allow for rapid onboarding and point accrual, making loyalty systems appealing targets. “Fraud in loyalty programs often comes from internal sources, such as clerks creating cards for themselves,” Litovsky noted. The most damaging incidents stem from account takeovers, where customers find their points drained, resulting in significant reputational and financial damage for companies.
Drawing from over 20 years of cybersecurity experience, Litovsky has implemented multi-layered fraud control frameworks that reduced abuse during point redemption by 52%, while improving customer experience significantly. He emphasizes the need for proactive measures: “Companies must evolve from reactive firefighting to a more strategic approach.”
The stark reality is that the global loyalty management market is on the rise, with trillions of unused points at stake. “The question is no longer about marketing but about financial infrastructure. All assets that represent value are vulnerable,” Litovsky concluded.
As the fight against loyalty fraud intensifies, companies must adopt robust protections akin to those in traditional banking. This includes implementing multi-factor authentication, real-time monitoring, and integrating anti-fraud policies directly into customer relationship management systems.
With losses reaching unprecedented levels, the urgency for businesses to safeguard their loyalty programs has never been more critical. As Litovsky states, “Success in cybersecurity is often measured by what didn’t happen.” Stakeholders in loyalty programs must prioritize security, ensuring that reward systems are as protected as any financial asset to sustain growth in an increasingly digital economy.
