How Axis Bank customers exploited reward points loophole
The glitch was first reported in 2023 and the bank fixed it in January 2024, according to reports.
A loophole in the Axis Bank's reward points allotment system led to a situation where multiple customers were able to get reward points they did not earn, Livemint reported.
Banks usually credit reward points to their customers' accounts based on the transaction size - the bigger the transaction, the more the reward points. However, if a customer cancels a transaction, the reward points of the corresponding transaction are also reversed.
In 2023, Axis Bank failed to do so for an undisclosed number of transactions.
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How did customers exploit Axis Bank's loophole?
Several Axis Bank customers exploited this loophole by placing high-value orders on e-commerce platforms. This helped them earn corresponding rewards before they cancelled the orders. Axis Bank ended up refunding the transaction amount without revoking the reward points.
This loophole persisted for two years before it got fixed in January 2024, Sumanta Mandal, Founder of TechnoFino, an online platform that reviews banking products such as credit cards, told Livemint.
How is Axis Bank fixing the issue?
The bank is now taking back the excess reward points that customers got. For existing customers, Axis Bank has simply begun deducting points from concerned customers' Edge Rewards accounts. In case of insufficient balance, the accounts' balances have turned negative, requiring the customers to pay the shortfall in cash.
"Due to a technical issue, EDGE REWARD Points from cancelled/reversed/EMI transactions on your Axis Bank credit card(s) between April ’23 and Jan ’24 were not reversed. These points have now been deducted from your EDGE REWARDS account," read an email sent to a customer.
Axis Bank pursuing former customers too
Axis Bank is also pursuing customers who are no longer a part of Axis Bank but who made use of the loophole.
They have begun receiving notices demanding payment based on the valuation of their excess rewards.
It remains unclear how Axis Bank will generate a statement for an ex-customer if they don't pay the amount voluntarily, according to experts. Without an outstanding balance to impact their credit score, former customers may have little incentive to settle the claims.
Axis Bank, however, has warned that failure to comply may lead to legal consequences.
Is Axis Bank justified?
Axis Bank is relying on Clause G of its Most Important Terms and Conditions (MITC) to justify the recovery effort. The clause states that if a cardholder has a negative rewards balance at the time of account closure, the equivalent amount will be converted into a statement debit that must be repaid before the card is officially closed.
Yet critics argue that the rule was introduced after many of these former customers had already shut their accounts.
