Loyalty programs are among the most powerful tools in a retailer’s arsenal, driving repeat purchases, increasing customer lifetime value (CLTV), and fostering brand affinity. However, with great rewards come great risks.
Forter’s analysis of more than 500 merchants reveals that loyalty fraud is on the rise — costing businesses billions of dollars annually. From fake accounts to fraudulent returns, bad actors are exploiting the very mechanisms designed to reward your best customers.
The good news? With the right visibility and protections in place, loyalty programs can deliver secure, sustainable growth.
LOYALTY TODAY
THE BUSINESS CASE
THE THREAT
TYPES OF ABUSE
Trust Premium
The Next Generation
Experiencing Friction
Building Trust
What’s next?
An analysis of more than
500
merchants
Spotting and stopping fraud
in your loyalty program
Adoption Is Broad — But Approaches Vary
of global retailers offer a loyalty program
85%
Travel & Hospitality – 99%
Apparel, Accessories, Beauty – 94%
Food & Beverage – 88%
Grocery & Convenience – 88%
Consumer Electronics – 79%
Marketplaces - 74%
Top Verticals:
Outliers:
Luxury retail focuses on exclusivity over points.
Manufacturers/wholesalers focus less on DTC loyalty.
Loyalty is one of our core customer engagement strategies — it’s the foundation of our retention efforts."
VP of Technology, Convenience + Fuel Retail
Global Reach, Growing Risk
Loyalty programs are now table stakes for global retailers, and as such, program adoption is increasing across all regions.
Loyalty adoption is most mature in Western markets, but emerging regions — particularly APAC — are rapidly expanding.
North America
45%
EMEA
29%
EMEA
24%
What Keeps Customers Engaged?
Consumers engage with loyalty programs that offer real, visible value. Here's what resonates most across key industries:
Apparel, Accessories & Beauty (n≈240)
Discounts on Purchases
Free Products/Services
Member-Only Offers
Early Access to Sales
Free Shipping
Personalized Rewards
95%
82%
76%
72%
65%
38%
Travel & Hospitality (n≈20)
Discounts on Purchases
85%
60%
Free Products/Services
Member-Only Offers
Early Access to Sales
Free Shipping
Personalized Rewards
90%
65%
45%
35%
Food, Beverage, QSR & CPG (n≈18)
Discounts on Purchases
88%
55%
Free Products/Services
Member-Only Offers
Early Access to Sales
Free Shipping
Personalized Rewards
61%
45%
40%
22%
Consumer Electronic & Goods (n≈15)
Discounts on Puchases
87%
47%
Free Products/Services
Member-Only Offers
Early Access to Sales
Free Shipping
Personalized Rewards
67%
60%
53%
27%
Why Loyal Customers Matter
75-96%
Apparel & Beauty
50-60%
Travel & Hospitality
50-60%
Food & Beverage
>50%
Consumer Electronics
Revenue Share from Loyalty Members
Purchase Frequency Uplift (Per Year)
CLTV Uplift
Our loyalty members spend more, come back more often, and engage with new products. That’s why it’s so important.”
Sr. Director, Digital Operations, Apparel & Beauty Retailer
Loyalty Fraud & Abuse Playbook
Loyalty Fraud Is Widespread — and Costly
Fraudsters are targeting loyalty programs with increasing sophistication. What was once viewed as a "nice-to-have" is now a critical area of fraud prevention focus.
74–96%
of revenue comes from loyalty members in key verticals
3–12+
Members purchase more frequently (3–12+ more/year)
1.5×-6.3×
higher CLTV for program members
Loyalty is our growth engine. If abuse impacts it, we lose that edge.”
VP of Tech, Convenience + Fuel Retail
Most Common Loyalty Fraud Tactics
Fake/Multi-Account Creation
To exploit referral bonuses or new member perks
Signs:
Spikes in sign-ups, low engagement
after reward redemption
Points Manipulation
Inflating or abusing point accrual and redemptions
Signs:
Rapid point buildup, unusual
redemption patterns
Bulk Buying & Resale
Buying discounted items for resale using loyalty benefits
Signs:
Large volume purchases of limited
items, high returns
Promo Code Abuse
Stacking or misusing codes beyond intended limits
Signs:
Frequent redemptions, repeat use
across multiple accounts
Abuse Type
Apparel
& Beauty
Travel
& Hospitality
Food &
Beverage
Consumer
Electronics
Fake Account Creation
Promo Code Abuse/Stacking
Points Manipulation
Bulk Buying & Resale
Tier Gaming/Acceleration
Appeasement/Refund Abuse
Excessive Returns After Points
Multi Account Referral Abuse
We’ve had users rack up points with low-value purchases just to redeem big-ticket items.”
Director, Risk & Finance, Global Retailer
1
Strengthen Your
Tech Stack
Use loyalty platforms that track KPIs like tier migration, redemption velocity, and revenue share
Pair with fraud solutions that verify user identity across interactions to block fake accounts and policy abuse in real time
Deploy Safe Experimentation
Test thresholds like redemption caps or tier rules before launch
Use simulation tools to gauge impact on fraud and customer experience
2
Automate Key Interaction Monitoring
Catch abuse where it happens: account creation, point accrual, redemptions, tier movements, refund requests, etc.
Automated detection flags risky behaviors before rewards are misused
3
Link KPIs to Abuse Signals
Marry engagement metrics with fraud indicators (e.g., account age vs. redemption, excessive returns)
Helps distinguish real customer growth from fraudulent activity
4
Foster Cross-Team Alignment
Loyalty, marketing, CX, and fraud teams must work together
Shared goals, shared data, shared wins
5
Loyalty success isn't just about activity — it’s about impact. Leading retailers measure loyalty success through:
CLTV growth
Repeat purchase frequency
Average order value
Member engagement, tier progression
Conversion uplift
Program membership growth
Loyalty helps us move customers up the value chain. We think about it in terms of life-cycle — how do we take someone from a one-time buyer to a loyalist?”
Director, Digital Fraud & Finance, Leading Apparel & Beauty Retailer
Turning Protection into a Competitive Advantage
Effective fraud prevention strategies do more than protect loyalty programs — they actively contribute to business growth. By reducing revenue losses from fraud, businesses can reinvest resources into enhancing customer experiences and improving program incentives. This proactive stance:
Builds trust
Protects revenue
Boosts ROI
Maximizes customer value
Investing in robust fraud prevention measures not only safeguards your loyalty program but also strengthens your brand, enhances customer satisfaction, and unlocks sustained growth.
Protect your program. Strengthen customer loyalty. Maximize your growth.
FIGHTING FRAUD
measuring success
Marketplaces (n≈50)
Discounts on Puchases
60%
35%
Free Products/Services
Member-Only Offers
Early Access to Sales
Free Shipping
Personalized Rewards
38%
90%
80%
40%
Grocery & Convenience (n≈50)
Discounts on Puchases
73%
18%
Free Products/Services
Member-Only Offers
Early Access to Sales
Free Shipping
Personalized Rewards
57%
42%
10%
45%
50-60%
Grocery & Convenience
45%
Marketplaces
+3 to +7
Apparel & Beauty
+2 to +5
Travel & Hospitality
+12
Food & Beverage
+1 to +3
Consumer Electronics
+50-60
Grocery & Convenience
+9 to +12
Marketplaces
2.5×
Apparel & Beauty
3–5×
Travel & Hospitality
Up to 2×
Food & Beverage
1.5–2×
Consumer Electronics
2x
Grocery & Convenience
6.3x
Marketplaces
Marketplaces
Grocery &
Convenience
More About Forter