Preventing iGaming Fraud: Chargebacks, account takeovers, and transaction fraud
Online growth has exploded in the past few years. The COVID-19 pandemic caused a shift in how people interact with the world. With many businesses being forced to close, activities commonly done in-person had to be completed online. Sports betting was not immune and many customers opted to try online gaming. However, with this massive growth can come greater risk of fraud.
Most iGaming companies’ fraud operations have a single goal: enable business growth while minimizing risk and losses. While jurisdictions vary by region and state, betting operators are required to enact some checks and balances to protect players. However, implementing fraud strategies that cover more than the bare minimum is wise for operators. Cybercrime is becoming increasingly sophisticated. A robust fraud management solution is needed to compete in this incredibly competitive, rapidly expanding industry.
Chargebacks, account takeovers, payment fraud, and high risk transactions — including deposits and withdrawals — are problems operators face daily. But how do cyber criminals commit these acts and what prevention methods exist? There are effective fraud management tactics that can reduce risk. Before we get to those, how big is today’s fraud problem?
How iGaming industry growth and fraud correlate
The global online gambling market size has a compound annual growth rate of 13.2%. Driven by the popularity of mobile gaming, the market value is projected to generate just over $117 billion by 2025. Here are some other notable online gaming growth stats from around the world:
- The European online gaming market was worth 24.8% of the continent’s total gambling market and is projected to reach 33.6% by 2025.
- In the Middle East and Africa, the online gaming industry is worth the equivalent of $4.8 billion but is forecast to grow and capture 12.1% share of the global market by 2022.
- The United States’ online gambling market is projected to have a compound annual growth rate of 15.41% between 2020 and 2025.
This massive industry growth has led to fraud increases. For example, bonus abuse rose 72% between 2018 and 2019, and account takeovers increased by 90% from 2020 to 2021, costing an estimated $11.4 billion in damage. Balancing fraud prevention with a positive customer experience is a big challenge for operators. But there is a solution. And awareness of common types of fraud and how to stop them is the first step.
3 types of iGaming fraud
As operators try to scale their businesses during the online sports betting boom, online gaming platforms have become an easy target for fraudsters. While there are many types of fraud attacks, the following three pose the greatest risk.
1. Chargebacks
Chargebacks are the bane of existence for many operators. Not only are they time-consuming and costly, but the online gaming industry faces a unique type of chargeback: friendly fraud. This occurs when a disappointed or remorseful customer tries to recover their losses by disputing a legitimate charge — claiming it was fraud.
For operators, friendly fraud may seem impossible to stop. Unless you go through the laborious ordeal of gathering evidence, it’s your word versus the customer’s. But with today’s fraud and chargeback management technology, disputes are now one of the most easily identifiable forms of fraud.
Player identity can be confirmed by analyzing a user’s behavior, location, and even keystroke and mouse patterns. Technology can automatically gather this and other necessary evidence during dispute representment, which can save operators time and dramatically increase their win rate.
2. Account takeover fraud
Account takeover fraud occurs when a player’s account is hacked. The fraudster will access the platform through stolen credentials and place bets, knowingly using someone else’s identity and assets. This results in victims filing a legitimate dispute. However, weeks or even months may pass before the valid card holder notices the fraudulent charges — so losses can add up.
Account takeovers can be easier to spot using device intelligence, which can accurately geo-locate a device as well as exploit its many attributes and characteristics. Seeing a discrepancy between a normal device location and a login from a foreign location can be a red flag, for example. For added protection, players can secure their accounts with multi-factor authentication, which relies on two or more forms of identity verification to login.
Multi-accounting, which occurs when fraudsters open hundreds of accounts to exploit promotions, is a growing problem in the online gaming industry as well. Velocity checks can detect this form of fraud and block devices that set up or access many accounts. This insulates a platform from bot attacks and can save the business from serious financial loss.
3. Transaction fraud
Transaction fraud comes in many forms. While multi-accounting and account takeovers are two types already discussed, fraudulent deposits (which may be funded using stolen credit cards), withdrawals, and other high risk transactions can also eat into online gaming operators’ profits.
The withdrawal step represents a high risk transaction that enables the fraudster to monetize their ill-gotten gains. The problem for online gaming operators is, fraud teams often manually review each withdrawal, which is a time-consuming process. Automated withdrawals are ideal to avoid this manual process, but that increases the risk of fraud. It’s imperative that operators use a fraud prevention system that flags suspicious transactions and automatically approves and rejects everything else — saving operators countless hours of labor.
Stolen credit cards are also a common problem in the online gaming industry. And, unfortunately, they are incredibly easy to obtain from the dark web. Operators can stop credit card fraud by leveraging community data, which can determine whether a card has been flagged as suspicious by other online merchants.
Fraud management strategies for operators and players
The online gaming industry’s fraud problem is massive—and it’s not going anywhere. Fraudsters are becoming more sophisticated. But with the right technology, operators can leverage the huge growth opportunities with far less risk. Partnering with a proven fraud prevention company can help.
Leading iGaming fraud prevention tools leverage data about human behavior and devices, both of which are more trackable than ever. And with today’s technology, the whole process can be automated, from data analysis to fraud detection and locking suspicious accounts. The result is fraud teams will save countless hours as operators greatly reduce losses.
The power of community data
Several types of collected data can be used in behavioral analysis. One of the most powerful resources for online gaming operators is community data, which helps operators know if this user or payment information has been seen before by other operators and if it is has been associated with fraud or chargebacks. This information can then be analyzed to detect stolen credit cards, suspicious devices, and other abnormalities.
When integrated with automated systems, any unusual activity out of an acceptable range can trigger alerts that prevent fraud attempts. As part of a comprehensive fraud management strategy, this analysis enhances an operator’s ability to stop numerous forms of iGaming fraud, including account takeovers and payment fraud.
To reduce online gaming fraud, prevention is key. With today’s fraud management technology and tools like behavioral analysis, community data, and velocity checks, doing so is easier than ever.
Prevent fraud with a solution made by iGaming industry experts
Accertify fraud management solutions for online sports betting were designed by experts from within the iGaming industry. This industry knowledge is irreplaceable, as iGaming fraud differs from that of other business sectors. The goal of operators is to provide a safe, positive, and profitable environment for entertainment, which can be made possible with tools offered by Accertify.
In addition to having comprehensive, easy-to-deploy fraud prevention resources, Accertify has the largest global database of information across verticals. The iGaming fraud management tools are built on a vast body of community data. iGaming is a tight circle, and the experts at Accertify bring unique insight and best-in-class support to operators and players worldwide.
Request a consultation to get help developing your iGaming fraud prevention strategy. Cover all your bases: minimize account takeover fraud, prevent chargebacks, and reduce transaction fraud.