--- title: "Referral Programs: How to Protect vs Gaming, Fraud and Other Undesirable Behaviors" id: "44774" type: "post" slug: "referral-programs-fraud-gaming" published_at: "2025-06-26T14:30:57+00:00" modified_at: "2026-01-19T21:30:47+00:00" url: "https://www.buyapowa.com/blog/referral-programs-fraud-gaming/" markdown_url: "https://www.buyapowa.com/blog/referral-programs-fraud-gaming.md" excerpt: "Unfortunately, any time in marketing when you offer valuable incentives in exchange for an action, you risk attracting undesirable behavior from those looking to unfairly profit from the offer. And the more generous the rewards and incentives you offer, the..." taxonomy_category: - "Thought Leadership" taxonomy_post_tag: - "Abuse" - "fraud" - "gaming" - "Referral Program" taxonomy_translation_priority: - "Optional" --- [Back to Articles](https://www.buyapowa.com/blog/) - [Thought Leadership](https://www.buyapowa.com/blog/category/thought-leadership/) # Referral Programs: How to Protect vs Gaming, Fraud and Other Undesirable Behaviors Last Modified: 19/01/2026 **12 min read** [https://www.buyapowa.com/blog/author/peter-cunningham/](https://www.buyapowa.com/blog/author/peter-cunningham/) **Author:** [Peter Cunningham](https://www.buyapowa.com/blog/author/peter-cunningham/) - Marketing Director of Buyapowa Unfortunately, any time in marketing when you offer valuable incentives in exchange for an action, you risk attracting undesirable behavior from those looking to unfairly profit from the offer. And the more generous the rewards and incentives you offer, the more likely you are to attract such behavior. And so, if you don’t take appropriate action, then you can find that your marketing campaigns cost you a lot of money in return for little or no measurable benefit. And in this respect, referral programs are no different. In the case of referral marketing, the behavior you need to consider protecting yourself from includes: - **Valueless transactions** – where a reward and/or incentive is paid out and the referred-in friend later returns the purchase or simply doesn’t go on to complete the purchase, for example by not paying a bill or premium. - **Self referral**, where a customer seeks to refer him- or herself using the same or a different name or email, typically to get a discount on the next purchase and/or the referral reward. - **Referrals without any intention of completing the transaction** on behalf of the referred-in friend. In such a case, often the referrer and the friend do exist and use their actual identities, but work together to get a reward and/or incentive while having no intention of completing the transaction or by simply taking advantage of the low minimum commitment required in order to earn a more valuable reward. - For example, if your program offers a reward of $100 for creating a savings account with a minimum deposit of US$1, you shouldn’t be surprised to get lots of accounts funded with exactly US$1, as you’re offering US$99 free money! - Alternatively, where a valuable reward is paid out for an action that doesn’t have a cost to the referred-in friend, [as Uber found out with its consumer referral program](https://www.buyapowa.com/blog/referral-programs-bring-you-the-worst-users/) , this led to lots of self referral simply to get an extra free ride. - ‘**Get a Referral Code’ sites** and affiliates where a new customer can get a referral code from someone completely unknown to the referrer. In this case you end up paying rewards and incentives for a transaction that would probably have happened anyway and/or even double paying by paying an affiliate for that transaction as well. - **Abuse by agents, brokers and employees** creating fake referrals to close sales and earn commissions or by paying out for fake referrals. - **Wider Fraud and Money Laundering** – this includes more organised fraudulent activity such as creating fake referrals to earn money on a large scale, using stolen identities or credit cards to get products and rewards, and even money laundering, where illegally obtained money is used to purchase something that isn’t wanted just to obtain cash or cash equivalent rewards that can be used legally. As you can see, these range from normal consumer behavior, such as returning goods that were disappointing, to valuable customers trying to get extra discounts for repeat purchases, or people simply trying to take advantage of your naivety to get ‘free money’, and up to something altogether more nefarious. What they all have in common though, is that unless you take steps to mitgate against all of these actions, you risk paying out valuable rewards without receiving any benefit in return. ## Designing your Referral Program to reduce Gaming and Fraud Here are some of the things you can do with the design of your referral program to reduce gaming and fraud: 1. **Make sure your referral terms and conditions are bullet proof:** 2. **State clearly on your referral program that you will not pay out for self referral or for the referral of existing customers etc.** 3. **Consider one-side vs two-sided rewards** 4. **Consider the value of the Rewards and Incentives you offer** 5. **Consider the type of rewards you offer** 6. **Consider a closed program** 7. **Consider Referral or Reward Limits** 8. **Consider only paying out Rewards after X confirmed referrals** 9. **Investigate large referrers** 10. **Check to see if you’re paying commissions elsewhere for the same new customer** 11. **Real time verification of the referred-in friend** 12. **Control access to your referral platform** 13. **Block bots and suspicious emails** 14. **Platform based abuse detection** ## The Only Way to Completely Avoid Gaming and Abuse and Paying for Valueless Transactions While it can be very difficult to prevent well organized and determined fraud, and you should not expect your referral program to provide full protection against it, all of the solutions listed above can help limit the risks of gaming, abuse or fraud, often at the cost of reducing the total number of referrals you’ll get, or by risking creating false positives. But in reality, the only way to avoid problems associated with gaming and abuse is to delay the payment of any rewards and incentives until you’re able to fully determine the value of the referral. In other words, you only pay out rewards and incentives post completion after certain conditions have been met, such as the new customer not cancelling within the statutory cooling off period and having made a payment. By delaying the payment of rewards and incentives, this also gives you time to check the new customer against your database to see if the customer is new and do any KYC or other anti-fraud checks you would typically do with any transaction. This of course requires not only that you can delay reward payments but also that you have systems in place that enable you to make these checks and that you’re able to reconcile the referrals with the information from your back end and then communicate the outcome of these checks to your referral system. Ideally you’ll be able to automate this reconciliation, but you may be able to upload CSVs or even manually approve or reject as required. If you work with an enterprise referral platform like Buyapowa, you will be able to transmit this information to the Buyapowa platform and fully protect your margins by only paying for valid referrals, and even pay different rewards according to the value of each referral. ## Gaming the System and the False Positive Problem One of the problems of trying to use any automated system for fraud detection based on scoring is the problem of false positives, where falsely denying a valid referral can lead to customer dissatisfaction, and even leading to customers posting in social media that your program is a fraud. To understand the problem, consider this example: Imagine my name is Freddie Smith. - I’m named after my uncle Fred Smith. - I invited my uncle to my house for Sunday lunch and said: ‘Uncle, you need to get that great mobile phone contract I was telling you all about. Let’s get you up and running now, and I can get you a great deal.” - So, I open my laptop, send my referral link to my uncle via email, close my account and get my uncle to open his email on my laptop and complete the transaction. - All in a couple of minutes. In any kind of scoring based system this looks very like gaming: - Fred Smith refers Fred Smith - With the same browser cookie and the same IP address - Within 5 minutes - With similar gmails fredmith1979 and fredmsith1997 Denying this because of rules would create two unhappy customers. That’s why most scoring systems recommend that referrals that are scored and listed as potential fraud or gaming are reviewed by your team and accepted or rejected, and often have a rule that if a referral is not rejected within a set time period, it’s automatically accepted. This either requires that your team regularly inspect and manually approve and reject, or that you set up an automation connected to your back end systems to do this. ## Is there a tolerable level of gaming? Given that many of the tactics suggested above, such as making your referral program closed, or limiting the number of referrals any one person can make in any given period, will tend to reduce the overall number of referrals you will get, and the risks associated with false positives, you might ask whether there’s an acceptable level of gaming you’re willing to accept? This will likely depend on your business model and the nature and value of the rewards you’re paying out. For example, many fast fashion businesses typically see more than 50% of all purchases returned. So they may view the fact that the referred-in friend created an account as being more valuable than the initial purchase, assuming that person will go on to make future purchases. Also the incentive is likely to be a discount off first purchase, and when the product is returned, the effect of that is negated. The inconveniences are mostly the logistics of the return and what to do with a returned dress that appears to have been worn at a party. Similarly, where a regular customer self refers to get a small discount, a brand may view that as a small price to pay to keep a good customer. However, where the brand is paying out high value rewards in cash or cash equivalents, as is often the case in the telecommunications, insurance, finance, energy and gaming industries, these arguments are not valid. Here a brand needs to be sure that it is getting value from the referrals. As mentioned above, the best way to do this is to delay the payment of rewards until the new customer has been validated and has cleared hurdles, like paying a phone bill. Then using APIs to automatically reconcile, accept and pay rewards or reject referrals is the best way forward. Also in these circumstances, there’s little benefit in many of the program design changes suggested above, as you can let a wide number people refer your brand confident that you’ll only pay for valid transactions. ## What next? If you’re considering setting up a referral program but are concerned about potential abuse, or if you already have a program and are seeing abuse and wonder how to deal with it, then [get in touch](https://www.buyapowa.com/book-a-demo/) and we’d be happy to talk through the options with you. ## Free eBook Referral Codebreakers Fill in the form & Unlock the science behind the world’s most successful & influential referral marketing programs ##### Categories ## Related Articles ### [Referral, Loyalty & Switching Risk in Italy’s Energy Market](https://www.buyapowa.com/blog/referral-switching-italy-energy/) - [Energy](https://www.buyapowa.com/blog/category/energy/) , [Thought Leadership](https://www.buyapowa.com/blog/category/thought-leadership/) [Read More](https://www.buyapowa.com/blog/referral-switching-italy-energy/) 17/08/2026 15 min read ### [The 42-Point Referral Gap: Why Greek ISPs Need Campaigns, Not Passive Programs](https://www.buyapowa.com/blog/greece-isp-referral/) - [Communications & Media](https://www.buyapowa.com/blog/category/communications-media/) , [Thought Leadership](https://www.buyapowa.com/blog/category/thought-leadership/) [Read More](https://www.buyapowa.com/blog/greece-isp-referral/) 17/08/2026 5 min read ### [When Everyone Offers Free Spins, Nobody Stands Out](https://www.buyapowa.com/blog/european-casino-referral/) - [Gaming](https://www.buyapowa.com/blog/category/gaming/) , [Thought Leadership](https://www.buyapowa.com/blog/category/thought-leadership/) [Read More](https://www.buyapowa.com/blog/european-casino-referral/) 17/08/2026 6 min read ### [Beyond the Free Bet: What European Sportsbook Customers Want from Referral](https://www.buyapowa.com/blog/european-sportsbook-referral/) - [Gaming](https://www.buyapowa.com/blog/category/gaming/) , [Thought Leadership](https://www.buyapowa.com/blog/category/thought-leadership/) [Read More](https://www.buyapowa.com/blog/european-sportsbook-referral/) 17/08/2026 5 min read ### [The Recommendation Gap in Canadian Car Insurance: Advocacy Is High, but Price Confidence Holds It Back](https://www.buyapowa.com/blog/referrals-canadian-car-insurance/) - [Insurance](https://www.buyapowa.com/blog/category/insurance/) , [Thought Leadership](https://www.buyapowa.com/blog/category/thought-leadership/) [Read More](https://www.buyapowa.com/blog/referrals-canadian-car-insurance/) 17/08/2026 6 min read ### [The Trust Transfer in Canadian Credit Unions: Members Are Ready to Refer—and Ready to Listen](https://www.buyapowa.com/blog/canadian-credit-unions-referrals/) - [Banking & Finance](https://www.buyapowa.com/blog/category/banking-finance/) , [Thought Leadership](https://www.buyapowa.com/blog/category/thought-leadership/) [Read More](https://www.buyapowa.com/blog/canadian-credit-unions-referrals/) 17/08/2026 5 min read ### [The Quiet Loyalty Problem in Canadian Home Insurance: 62% Will Refer, but 31% Could Still Be Won Away](https://www.buyapowa.com/blog/canadian-home-insurance-referrals/) - [Insurance](https://www.buyapowa.com/blog/category/insurance/) , [Thought Leadership](https://www.buyapowa.com/blog/category/thought-leadership/) [Read More](https://www.buyapowa.com/blog/canadian-home-insurance-referrals/) 17/08/2026 7 min read ### [The UK Pet Insurance Loyalty Paradox: 66% Plan to Stay, but 44% Could Still Be Won Away](https://www.buyapowa.com/blog/uk-pet-insurance-loyalty-paradox/) - [Insurance](https://www.buyapowa.com/blog/category/insurance/) , [Thought Leadership](https://www.buyapowa.com/blog/category/thought-leadership/) [Read More](https://www.buyapowa.com/blog/uk-pet-insurance-loyalty-paradox/) 12/08/2026 5 min read ### [Powering Referral Marketing for Canada’s Finest](https://www.buyapowa.com/blog/canadas-finest-referral-marketing/) - [Use cases](https://www.buyapowa.com/blog/category/use-cases/) [Read More](https://www.buyapowa.com/blog/canadas-finest-referral-marketing/) 11/08/2026 5 min read ### [30 Tips to Generate More Customer Referrals](https://www.buyapowa.com/blog/tips-encourage-customer-referrals/) - [Thought Leadership](https://www.buyapowa.com/blog/category/thought-leadership/) [Read More](https://www.buyapowa.com/blog/tips-encourage-customer-referrals/) 11/08/2026 40 min read ### [Referral Is Already Influencing Insurance Decisions. 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