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The Right Fit to Fight Loyalty Fraud

For the apparel industry, e-commerce is always in fashion. The industry is expected to generate $765 billion in online sales annually by 2022. Yet brands for apparel and accessories also face rising incidences of online fraud, from “buy online return in store” (BORIS) fraud to online account takeovers. Forter’s 2019 Fraud Attack Index found that fraud increased 44% year over year in the apparel industry. And now those brands have another fraud risk to worry about: loyalty account fraud.

Competition for customer loyalty is fierce among brands, and with good reason: brand loyalty directly equates to higher customer lifetime value, the best measure of business health. To maintain and grow that loyalty, brands use loyalty programs to reward their best customers with special discounts, gift certificates, exclusive offers, and other incentives. But loyalty programs often have fewer security and fraud mechanisms in place; customers who might tolerate multi-factor authentication for an online purchase are less likely to tolerate it just to view their rewards balance. And these relaxed security measures are an open door to fraudsters.

Last year, loyalty fraud rose 89 percent. Fraudsters have discovered what many loyal customers have long known: loyalty rewards can have the same value as cold, hard cash—particularly when those rewards can score brand-name merchandise. In many cases, that merchandise ends up on the Internet, where it can be resold for nearly its full retail value.

When brands reimburse their customers for stolen rewards, loyalty theft becomes a double loss. Yet there is more than the cash value of the stolen points at stake. Sixty-nine percent of loyalty program executives report that loyalty fraud has a negative effect on their brand reputation and customer lifetime value. There is also the operational cost of fighting fraud to consider, which often involves manual reviews and investigations that can take weeks or even months. And, finally, there is the “fear factor” of potential fraud, which can prevent brands from rolling out new or more aggressive loyalty campaigns that could otherwise improve brand engagement.

No one likes feeling exposed to fraud, particularly when it exposes your customers too. So how can apparel companies stop loyalty fraud? With Forter’s Loyalty Program Protection solution. Forter stops loyalty fraud in its tracks by protecting loyalty accounts at their most vulnerable touch points: during login, checkout, when account settings are changed, or when passwords are reset. Forter’s solution leverages data on more than 620 million users with advanced machine learning and the combined human intelligence of our security experts plus customer security experts to protect loyalty programs from fraud and abuse.

Building great relationships begins with trust. Loyalty fraud erodes that trust and breaks the bond between brands and customers because it strikes at the very heart of the loyalty that ties them together. Apparel brands would give their best customers the shirt off their rack to make them feel valued. Forter ensures that fraudsters can’t take that away.

To learn how you can prevent loyalty fraud and get back to building great relationships with your customers, download our white paper, “Loyalty Fraud: Attacks From All Sides.”

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