Loyalty Blogs

Loyalty programs have become billion-dollar ecosystems, essential customer retention mechanisms for companies in virtually every industry. But there’s a painful reality most loyalty providers won’t share with you: security has lagged behind innovation.  

While businesses spend lots of money securing payment systems, loyalty fraud evades detection. Why? Because unlike credit card fraud, loyalty fraud goes unnoticed until it is too late. Businesses believe being PCI DSS (Payment Card Industry Data Security Standard) compliant will protect customer data. But guess what? It’s not. 

Most providers continue to use PCI DSS v3, a system that has turned obsolete and ineffective to tackle cyberthreats. The consequence? Companies feel secure when they are not, and cybercriminals use the gaps to their advantage. Let’s discuss why this is an issue and what you need to expect from your loyalty provider. 

The Data Breach Crisis in Loyalty Programs: The Hard Numbers  

Loyalty programs have become targets of choice for cybercrooks, and the statistics are striking:  

• Loyalty fraud cost companies $3.1 billion in 2023 alone, a whopping increase from earlier years. 

• A compromised loyalty account sells for $10-$50 on the dark web, versus only $5 for a stolen credit card. Why? Because points and rewards transactions are more difficult to track and do not have real-time fraud detection. 

• Credential stuffing is responsible for more than 45% of loyalty program compromises. Cyber attackers leverage stolen login credentials from past breaches because they are aware that most users recycle passwords.  

• More than 60% of companies continue to use legacy security requirements such as PCI DSS v3, which do not account for contemporary threats such as API exploits and automated fraud attacks.  

Take the example of a large international airline, which experienced a breach of its loyalty program in which hackers compromised more than 9 million customer accounts. The pilfered points were traded for gift cards and sold online, resulting in millions of dollars in losses. The breach went undetected until customers began complaining about missing miles—months after the first attack.  

This is what occurs when companies rely on antiquated compliance requirements rather than proactive security controls. 

What Loyalty Providers Won’t Tell You  

Most loyalty providers play it safe with minimum compliance and don’t want to talk about security vulnerabilities. Here’s what they don’t tell you: 

1. PCI DSS v3 Was Never Designed for Loyalty Programs  

PCI DSS v3 was launched way back in 2013—well before APIs became a major attack vector. It addresses credit card transaction security but doesn’t do much to protect loyalty data, points, and customer credentials. 

2. Loyalty Fraud is More Profitable Than Credit Card Fraud  

Unlike credit card transactions, loyalty points are not held to the same scrutiny. Hackers take advantage of this:  

• They pilfer points and cash them out for gift cards or free products.  

• They sell compromised accounts on dark web forums.  

• They drain loyalty accounts with automated bots before companies even realize something is wrong.  

3. Most Loyalty Providers Don’t Secure APIs Properly  

Today’s loyalty programs depend on APIs for integration—but unsecured APIs are a hacker’s goldmine. One vulnerable API can leak customer accounts, transactions, and personal information. If your provider isn’t protecting APIs with encryption, authentication layers, and rate limiting, your business is vulnerable. 

4. Compliance ≠ Security  

Being “PCI DSS certified” doesn’t necessarily make a program secure. Compliance is only a starting point. Security involves ongoing monitoring, AI-based fraud detection, and multi-layered protection methods—most of which legacy providers don’t provide.  

Breaking Down PCI DSS v4.0.1: Why It’s a Game-Changer 

To meet the changing security needs, PCI DSS v4.0.1 was released. Here’s why it’s essential for loyalty programs:  

• Risk-Based Security Solution: Rather than merely checking boxes of compliance, v4.0.1 obliges firms to proactively analyze and remedy nascent risks.  

• Enhanced API Security Practices: Loyalty programs are now mandated to authenticate and encrypt API endpoints to inhibit data leaks.  

• Required Multi-Factor Authentication (MFA): Consumers and enterprises will be mandated to use MFA for logins into their accounts, meaning that credential-stuffing assaults will be slashed drastically. 

• Continuous Compliance and Real-Time Monitoring: In place of episodic audits, companies need to monitor in real-time for risk and adjust controls accordingly.  

The change is pivotal because fraudsters are changing even more rapidly than compliance guidelines. If your merchant is still PCI DSS v3, then your loyalty scheme is naked to cyberthreats.  

Novus Loyalty: India’s First Loyalty Provider to Acquire PCI DSS v4.0.1  

At Novus Loyalty, we don’t treat security as an afterthought—it’s a priority. That’s why we went out and took a proactive approach to PCI DSS v4.0.1, ahead of most providers.  

Below is how we go above and beyond compliance to really secure loyalty programs: 

1. AI-Driven Fraud Prevention  

Our system scans transactions in real-time and marks suspicious transactions before fraudsters can move forward. Machine learning algorithms identify patterns, preventing fraud before it occurs.  

2. End-to-End API Encryption  

Unlike providers who expose APIs, we encrypt API traffic and implement strict authentication standards, and our customers’ data is never compromised.  

3. Zero Trust Security Model  

Rather than trusting internal systems to be secure, we implement a Zero Trust model—each access attempt is authenticated, even from within the network.  

4. Real-Time Threat Detection & Response  

We don’t merely perform yearly security scans; our ongoing monitoring identifies breaches in real-time, enabling immediate response and mitigation.  

Final Thoughts: Why Businesses Need to Expect More from Loyalty Providers  

Those days are gone when one could think “PCI DSS certified” means “secure.” Loyalty security is today a business imperative, not merely a compliance issue.  

Ask Your Loyalty Provider if they are on PCI DSS v4.0.1, or still mired in old v3?  

Insist on API Security & MFA Implementation: If not, your data is vulnerable.  

Choose for a security-first loyalty solution: Customer data protection is not a choice—it’s a mandate.  

With Novus Loyalty, businesses don’t just receive loyalty solutions—they receive security that will last. Ready to level up your program with best-in-class security? Let’s discuss.