Loyalty programs are a powerful way to keep customers coming back but they’ve also become a rich target for fraudsters. Whether it’s account takeovers, fake sign-ups, or stolen reward redemptions, loyalty reward fraud is on the rise. 

In fact, The Loyalty Security Association estimates that $3.1 billion in redeemed loyalty points are fraudulent, leading to losses of around $1 billion every year. Why? Because fraudsters have figured out that reward points are often easier to steal than cash. 

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What is loyalty reward fraud? 

Loyalty reward fraud happens when attackers exploit weak sign-in flows or compromised credentials to access customer accounts and redeem rewards. But the damage doesn't stop at stolen points. Brands are left dealing with revenue loss, customer churn, and rising support costs. Many don’t realize it’s happening until customers reach out with complaints. 

Strivacity helps you spot and stop loyalty fraud early. With adaptive access, built-in fraud detection, and real-time insights, you can track suspicious activity across sign-ups, sign-ins, and redemptions while keeping fraud, support, and marketing teams aligned. 

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4 ways to keep fraud out of your loyalty program 

1 - Block fake sign-ups before they start

Loyalty fraud and account abuse often begin at the registration stage. Fraudsters use bots, throwaway credentials, or stolen data to create fake accounts that exploit welcome bonuses, referral incentives, and other promotional rewards. These fake registrations can overwhelm systems, inflate customer acquisition costs, and erode the value of loyalty programs.

Strivacity detects fraud by running layered checks during sign-up and all in real time behind the scenes. Here's how:

• Identity proofing and verification
  Validates that a real person is behind the registration, not just a name or email scraped from a breach. This helps stop synthetic identity fraud, where attackers use a mix of real and fake information to appear legitimate.‍

• Bot detection
  ‍Identifies non-human behavior like rapid-fire sign-ups from multiple IP addresses. This blocks automated account creation–a common tactic used to flood systems with thousands of fake accounts.
  

• Phone number risk evaluation 
  ‍Flags virtual numbers (like VoIP or temporary SMS services) that are commonly used by fraudsters to bypass SMS verification. This protects against SIM swapping and burner phone abuse used to scale fake registrations.

• Email, phone, and physical address verification
  Verifies contact details against known risk signals such as 3rd-party databases, phone carriers and postal services. For example, detecting abandoned properties or suspicious domains helps stop fake profiles and ensures every account is tied to traceable, credible information. 

• Breached password detection
  Blocks breached passwords at every entry point including sign-up, reset, and admin updates. Strivacity automatically checks passwords against known breach databases. If a customer tries to use a compromised password, it’s rejected and a secure alternative is required. This helps stop credential stuffing and account takeover (ATO) attacks before they start.

With fraud and identity verification built-in, Strivacity stops fake accounts before they ever become a problem.  

2 - Stop Account takeovers in their tracks 

Once a fraudster gains access to a customer’s account, they can quickly cash out loyalty points, leaving customers frustrated and brands footing the bill. This type of account takeover (ATO) not only results in direct losses, but also damages customer trust and can spike support costs. 

Strivacity helps stop ATOs before they happen with layered, adaptive access rules that analyze context and behavior during every login attempt. Here’s how: 

• Passkeys and MFA
  Reduces reliance on passwords (a top ATO vector) by using phishing-resistant credentials. Multi-factor authentication (MFA) adds an extra layer, helping block access even if credentials are compromised in a data breach or phishing attack. 

• Bot detection
  Blocks or requires additional authentication for automated login attempts, such as credential stuffing campaigns using lists of leaked usernames and passwords. This protects against high-volume brute force attacks designed to take over multiple accounts at once. 

• Anonymous proxy / Tor detection
  Identifies users hiding behind anonymous networks and is often a red flag for malicious intent. Many attackers use VPNs, proxies, or Tor to conceal their real location during ATO attempts. 

• Known device detection
  Recognizes devices customers have previously used to sign in, allowing frictionless access for safe logins while challenging unknown or suspicious ones. This helps catch device-based session hijacking or login spoofing. 

• Geolocation detection
  Compares the user’s IP-based location to their historical patterns. Attempts from countries or regions that don’t match past behavior can be flagged or challenged, helping stop geolocation anomalies linked to fraud. 

• Improbable travel 
  Detects logins that would be physically impossible based on timing (e.g., logging in from New York and 10 minutes later from Singapore). This protects against session hijacking and credential sharing from bad actors. 

• Risk-based authentication
  Automatically adjusts security requirements based on contextual risk. This helps strike the right balance between security and customer experience. 

• Behavior analytics 
  Detects subtle deviations from normal habits such as a user typically logging in on weekdays but suddenly logs in Sunday night from another state. If unusual behavior occurs, customers can be asked to step-up authentication. 

With these adaptive approaches, Strivacity ensures that customers aren't hit with unnecessary friction unless something looks off. That means fewer support calls, stronger protection for loyalty programs, and a seamless experience for your real customers.

3 - Challenge risky reward redemptions

Some loyalty fraud happens after the fact–when points are redeemed unusually fast, in bulk, or across accounts. With Strivacity, you can set adaptive access policies that: 

• Flag redemptions from unusual geolocations
  If a customer typically redeems rewards from one region but suddenly cashes in points from a foreign or unexpected location, that can signal ATO or account farming. Strivacity flags these anomalies using IP-based geolocation tracking so you can block or require step-up authentication before they go through.

• Require re-authentication for high-value rewards
  Just like banks ask for extra confirmation when transferring large sums, Strivacity lets you step up authentication for redemptions over a set point threshold. This stops fraudsters from draining accounts in a single hit and gives your team time to intervene.

• Automatically disable suspicious accounts during investigations 
  When multiple risk signals converge like an unusual redemption amount from a new device on an anonymized network, Strivacity can automatically disable the account for review. This helps contain damage from coordinated loyalty point attacks, such as those involving credential stuffing. 

These approaches ensure you can stop fraud without frustrating your best customers. Legitimate ones breeze through redemption flows, while risky behavior is halted automatically or challenged intelligently. This helps you protect program integrity and brand trust.

4- Give teams a clear view of threats 

Legacy CIAM and loyalty fraud tools offer fragmented data, delayed insights, or narrow visibility. Strivacity was purpose-built to unify identity, fraud detection, and customer insights in one solution—so fraud, marketing, and support teams stay in sync. Key metrics include: 

• Blocked fraud attempts
  Track how fraudsters attempt registrations, bot logins, and how many risky reward redemptions are stopped. This helps your team understand where fraud pressure is coming from, whether it’s bots abusing referral bonuses or stolen credentials used to drain accounts.

• Identity verification and fraud transactions 
  Get details on sign-ups that failed identity proofing, phone/email validations, or behavioral risk checks. This data helps you pinpoint how fraudsters are trying to game your loyalty flows.

• ATO trends 
  Monitor loyalty accounts targeted by credential stuffing or unusual device access. With Strivacity’s behavior analytics and geolocation signals, you can spot red flags early and stop ATO-driven point theft before it becomes a customer service fire drill.

• Voice call/SMS and email resend requests 
  An uptick in resend requests can signal fraudsters OTP (one-time password) bombing your password reset and MFA workflows or show friction points for real customers. Strivacity lets you spot the difference and adjust experiences accordingly. 

• Consent activity
  See how and when customers give or withdraw marketing and data sharing consent. This is valuable for understanding which loyalty offers resonate and ensure regulatory compliance across campaigns. 

Loyalty is earned. Don’t let fraud steal it

Loyalty programs are meant to reward your best customers–not line the pockets of fraudsters. With Strivacity you can get a CIAM solution that works behind the scenes to keep your sign-ups, sign-ins and redemptions safe. 

Ready to see how we can help you stop loyalty fraud without slowing down your real customers? Let us show you how to secure your program and protect your best customers.