When run efficiently, trade loyalty programs become the primary tool through which pay-outs are made to trade partners. All non-margin payments such as schemes, incentives, rewards, etc are passed on through the loyalty program. This amounts to quite large sums of money being distributed through the programs. In this context it is extremely necessary to have proper checks and balances in the system. A few of them are highlighted below.
- Documented Proof of Purchase
Common Sense dictates that for any amount that you are taking a liability to, it is very important to have the documents backing the proof of transaction which led to that liability. This is why so much focus is placed on collecting receipts in retail. The best possible scenario is to have a centralized ERP/DMS systems which provide authenticity of the transactions. In the absence of that the only option that remains is to have a proof of purchase document, usually an invoice saved centrally. This allows for dispute resolutions and audit trails.
- Verification and Approval Loops
While asking for proof of purchase is the first step, it is useless if not accompanied by a verification and approval loop. This can happen centrally through third parties or can happen through the upstream members of supple chain. It is important however that someone manually checks each document is valid and correct. In the absence of this one only encourages fraudulent behaviour in the program.
- KYC Collection
Once an instance of fraud is caught, it is always a tough and negative conversation to have with the stakeholders. Better approach is to preemptively stop the fraud from taking place. KYC collection during registration of the program is one effective way to weed out fake outlets and wrong numbers before entering the program. Documents such as GST registration, ID proofs, Address proofs, etc can be collected at this stage so that there are no fake partners in the system.
- OTP Checks
In this age of information and accessibility, it is important to have digital interfaces for every program. But we are living in conflicting times as the onus on information security has not caught up with the accessibility. Especially in our country. What this leads to is rampant unchecked sharing of login credentials and cavalier attitudes towards logging into somebody else’s account. This opens up to fraud as redemption requests can be placed and profile information can be changed through the account. To avoid this, it is best to have an OTP validation at login or at least when someone is redeeming rewards.
These are only a few of the measures that can be taken to prevent fraud in loyalty programs. There are many more things that one can do to fight the program killing menaces that fraud transactions can be. If you want us to help you design a fraud proof and leakage free Loyalty Program for your company, please fill the form in the link below and let us get in touch with you.