Editorial by Michael Smith, Managing Partner, Airline Information & Co-Founder, LFPA
Survey research carried out by Airline Information revealed that 72% of airline loyalty programs have an issue with fraud. Additionally, 30% of airline programs reported the problem was growing rapidly year-on-year. However, surprisingly, 10% of airline loyalty programs didn’t know if they had a fraud problem or didn't know that it was possible for loyalty fraud to occur.
Miles and points have truly become cash. In addition to being redeemed for flights or hotel stays, they can now be turned into many goods & services, including gift cards, which are effectively cash. In many cases, loyalty fraud is occurring because people have their accounts hacked or stolen, since fraudsters have realised that consumers and companies handle the security on loyalty accounts with less precaution than the would bank accounts. However, for many customers, they may have loyalty points worth thousands of Dollars.
The research revealed that the most pressing loyalty fraud problem involved criminals posing as “travel agents” using either stolen or illegally bought miles to turn in to tickets which are then sold to unsuspecting customers. Often the customer does not know this is case until they try to claim the frequent flyer miles earned on the itinerary.