“(…) the chances are good that there is a teenager out there who, at this very moment, is doing something to try to take advantage of open vulnerabilities that they found in your loyalty program.”Comarch, “Why machine learning means proactive loyalty fraud prevention”
One of the first commercial uses of machine learning was fraud detection. PayPal pioneered this effort and ended up being Palantir.
Simply put, they are anomaly detection systems using unsupervised learning: if you have a loyalty program running for thousands of consumers, you can detect if someone is not playing by the rules.
Loyalty programs are based on points/rewards. They don’t have the same security treatment as regular cash-type transactions. There is no secure transaction system for points. Loopholes, employee misuse, weak passwords, non-encrypted data can open the door to fraud.