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Protecting the Loyals

May 22, 2017
By Alan Nevels, SVP of Card Risk & Merchant Services, ICBA Bancard
Loyalty programs are a tremendous customer retention tool, but in recent years have become a target for cyber criminals who are hacking into consumer accounts and siphoning off points which they sell for profit on the Dark Web. These loyalty program points and miles represent more than $48 billion of tangible rewards and can be easy targets for fraudsters since consumers tend not to monitor their point balances with the same care they would their bank account or credit card statements.

Community bank card issuers are in a great place for offering loyalty programs, because their customers already have the expectation that their financial institution is taking every precaution to protect their personal information. However, if a customer’s loyalty points are compromised it could dramatically shake this trust and jeopardize the entire banking relationship.      

It is therefore imperative that community banks implement strong security practices to secure these program assets. Below are some key considerations:

Convenience vs. Protection

Balancing convenience against protection has never been an easy task. Too many restrictions can decrease usage and interest and too few can leave your cardholders vulnerable.

Ideally loyalty programs should find the perfect compromise by employing reasonable measures such as limiting the number of redemptions in a given day or time period, or placing limits on point transference. Another practical solution that protects the customer without making him or her jump through hoops to access their own points, are safeguards such as contacting the customer via email or text when points for travel or merchandise have been redeemed or when a change has been made to the customer’s profile. (It is therefore very important that customers create a loyalty rewards profile otherwise they may not receive these alerts.)

And, with the average American practically tethered to his or her mobile device, mobile offers another means of giving customers both convenience and security. By allowing loyalty program customers to track balances and redeem rewards through a payments app on a mobile device, fraud is further minimized because the customer must authenticate information for two accounts instead of one.    

Because most of these parameters are set by the loyalty program operator, community banks should check in with their account representative from time-to-time to learn more about security measures. It is also always a good idea to remind customers to monitor their loyalty rewards  balances and report anything immediately that looks suspect.

The loyalty industry is a booming business showing great promise with retaining and engaging customers. Trust is the beating heart of a strong loyalty program. Simple, convenient security measures that protect your loyalty customers will help maintain that trust while adding to the overall service experience.