PSCU Clamps Down on Security in Fight Against Rewards Fraud

PSCU Clamps Down on Security in Fight Against Rewards Fraud
January 20, 2017 Marketing GrafWebCUSO

PSCU has rolled out a new security program in its CU Rewards program as part of an effort to intensify its battle against fraud in credit union loyalty rewards programs, according to an announcement from the St. Petersburg, Fla.-based CUSO.

The CUSO’s new tool uses a risk-score identification process and a digital risk engine to detect and prevent criminals from fraudulently redeeming loyalty rewards, according to PSCU. The tool uses an authentication process to validate devices, members and transactions during the rewards redemption process without depending on information supplied by members.

“Unlike other tools that focus on the device, the member or the transaction, this tool detects suspicious activity through digital risk-engine rules, blocking and eliminating blacklisted devices, inconsistent location indicators, form-filling behavior, and multiple redemptions from different identities on a single device,” PSCU said.

PSCU said the tool helped reduce loyalty fraud in 11 attempts worth 1.2 million points during the pilot phase. It plans to offer the tool for free to credit unions in the CU Rewards program, which number over 330 and represent 3.5 million cardholders. Loyalty fraud costs more than redemption points; it also can damage a credit union’s reputation, PSCU VP of Loyalty Solution Annie Cox said.

PSCU also plans to use the tool to help it spot fraud trends and alert other credit unions.

The move comes at a time when membership in loyalty programs is growing, as are data breaches. American consumers had a record 3.3 billion memberships in customer loyalty programs, a 26% increase from 2013, according to a 2015 report from loyalty program research firm Colloquy. The average household belonged to 29 loyalty programs in 2015 but was active (meaning it redeemed rewards at least once a year) in just 12 of them. That too is an increase from 2013, when the average household belonged to 22 programs and was active in nine of them.

Credit card rewards programs accounted for 578 million memberships; specialty stores and airline frequent flier memberships had 434 million and 356 million members in 2015, respectively.

The number of data breaches hit an all-time high in 2016, according to the Identity Theft Resource Center. The 1,093 breaches last year represent a 40% increase over the 780 reported in 2015. Approximately 45% of the breaches in 2016 were in the business sector, and another 35% were in the healthcare and medical industry, according to the Identity Theft Resource Center. Breaches in the banking, credit and financial sector were about 5% of the total.

Exton, Pa.-based Citadel Federal Credit Union helped test PSCU’s new tool.

“We jumped at the opportunity to pilot test the new tool, as some of our members had recently experienced fraudulent rewards redemptions,” said Citadel VP of Payments and Deposits Liz Fee. “This is a new criminal angle our members are not sensitized to, so we found they appreciated knowing that we were monitoring redemption activity for them and holding all suspicious redemptions for confirmation of legitimacy before allowing them to be fulfilled.” Citadel FCU has $2.8 billion in assets and about 182,000 members.