Ecommerce fraud is rising fast. Global losses are projected to reach $44 billion in 2024 and could climb to $107 billion by 2029. Two thirds of customers whose security is compromised won’t shop with that retailer again. For online retailers, the challenge is rather stark. Fraud is not only expensive, it’s also evolving quickly. Most brands already use multiple detection tools and many are increasing their budgets, but they’re still missing a valuable layer of protection: the loyalty program.

Often viewed purely as a retention tool or a clever marketing tactic, loyalty programs can actually play a quiet, steady role in reducing fraud. From encouraging honest behavior to identifying red flags early, a thoughtful program can help protect businesses and customers alike. Loyalty programs work to create deeper relationships, more visibility and stronger reasons for customers to act in good faith. Why would they want to mess with a company who has supported them?

A more complete picture of your customers

One of the most significant benefits of a loyalty program is the data it allows you to collect. In order to earn rewards or progress through tiers, customers need to create an account. That account allows you to collect valuable behavioral data over time. Purchase history, browsing patterns, referrals and even the devices customers use all contribute to a clearer picture of what normal activity looks like. But it’s not just useful for selling to them.

This means that when something is off, it stands out. Maybe someone is suddenly placing bulk orders to unfamiliar addresses. Maybe an account that used to buy once every two months is now making three purchases a week from different devices. These kinds of anomalies are much easier to spot when you’ve got the right data. Loyalty discourages ‘friendly fraud’

Not all ecommerce fraud is hostile or obviously criminal. In fact, a large portion of fraud comes from customers who genuinely like the brand. One survey by Signifyd found that 21% of consumers admitted to requesting a refund by claiming their package never arrived, even though it had. Another 22% said they had asked for a refund by falsely stating that a product in good condition was actually unsatisfactory. This kind of “friendly fraud” is often rationalized with thoughts like, “I shop here all the time, they won’t miss one thing.”

This is where loyalty becomes powerful. Customers who are part of a program have something to lose. Whether it’s points, a birthday perk, or a near-upgrade to the next VIP tier, the potential cost of fraud suddenly feels more real. That pause can be enough to make someone think twice. It’s not about punishment. It’s about creating an incentive to keep doing the right thing.

Don’t let prevention get in the way of experience

Fraud detection tools are good at spotting risks, but they can also be blunt. When settings are too tight, they start to block legitimate customers. People get frustrated when they’re asked to verify again and again or when their order is suddenly flagged without explanation. It’s a short path from frustrated to gone – never to return.

Loyalty programs offer a more human response. Instead of simply tightening the rules, brands can reward the behaviors they want to see. Maybe that’s a thank you for not returning an item. Maybe it’s early access for customers with consistently positive reviews. These small gestures help reduce fraud while reinforcing trust.

In categories like beauty, fashion, or wellness, that experience matters. The relationship is often emotional. Trust, care and familiarity are part of the product. So protecting the customer journey without adding friction is key.

Marketing Technology News: MarTech Interview with Stephen Upstone, CEO & Founder @ LoopMe

When trust is broken, loyalty helps repair it

Sometimes fraud happens outside the brand. Fake ecommerce sites, phishing emails, and lookalike domains trick people into sharing personal information. It’s damaging for the customer, and it’s damaging for the brand.

Now, picture a customer named Jamie. She’s loyal, shops regularly, and refers friends. One day, she clicks a link in an email that looks like her favorite brand, enters her password, and doesn’t realize it’s a fake site until money is taken from her account. She’s upset, and while the brand didn’t do anything wrong, she’s suddenly lost trust.

This is the moment where a loyalty program can do more than a refund ever could. Jamie’s brand could credit her account with extra points. They might bump her to the next tier or offer early access to a new launch. These small but meaningful actions help reestablish the relationship. They show that the brand values her and is trying to make things right.

Encouraging honest behavior, quietly and consistently

A loyalty program can also encourage behaviors that help prevent fraud in the first place. Customers who don’t return items might receive perks. Those who refer real people instead of gaming the system could be given a special bonus. Even a small reward for updating account security details could help keep fraud at bay.

This kind of culture-building works. It gives customers a sense that they’re part of something and that their actions matter. In turn, it makes fraud less appealing and more costly in terms of what they could lose.

A longer-term mindset in a fast-moving problem

Ecommerce fraud isn’t going away. As long as people shop online, there will be those trying to take advantage. Most brands will continue investing in detection tools, which is essential. But there’s also room for a different approach – one that works alongside technology rather than against it.

Loyalty programs give you that. They add context, shape behavior, and help you spot trouble before it causes damage. They reduce the sting when something goes wrong. And they do it without sacrificing the customer experience.

Trust is both fragile and powerful. But the right loyalty strategy goes beyond being a marketing tactic. It’s a quiet, consistent way to keep your customers safe, make them feel valued – and keep them coming back.

Marketing Technology News: The Secret Sauce to Retail Media Success