In early 2020, Covid-19 lockdowns moved life indoors and at home, emptying common gathering spaces for entertainment, including sports arenas, casinos, bars and restaurants.
As in-person gaming and gambling fell by the wayside, people hungered for ways to make the best of an isolating experience. That’s when online entertainment gained ground. During the first six months of the pandemic, the U.S. saw a 255 percent increase in first-time online poker players, and the niche as a whole grew 43 percent. From 2020 to 2025, America’s online gambling industry is expected to achieve a compound annual growth rate of 15.41 percent.
Along with increased traffic and demand on virtual gaming platforms, operators can expect to see growth in another area: fraud.
Even before the pandemic, a 2019 study found that one in 20 online gaming accounts worldwide were associated with a fraudster. With the growing popularity of online gaming and the anonymity of players behind devices, it’s becoming increasingly difficult for operators to distinguish genuine participants from bad actors.
By implementing internet protocol (IP) decisioning data, operators can gain critical, independent insight on each player and reduce instances of fraud. Additionally, such data can provide operators with greater opportunity to maintain compliance with state and federal laws, enabling them to maintain licenses and grow their businesses.
Know the Financial and Compliance Risks
Gaming enterprises have long been a magnet for fraudsters and have always placed a high priority on protecting the integrity of their systems. Every industry with an online presence faces a similar challenge in maintaining security, including the constant scramble to keep up with fraudsters’ new methods of infiltration and exploitation.
Like retailers and financial services firms, gaming enterprises are also at risk of practices such as chargeback abuse and credit card fraud. With chargeback abuse, cardholders contact the issuer and deny making charges they actually made to receive a credit. Additionally, gaming operators may be exposed to fraudulent or stolen credit card information, hampering their ability to collect from players.
Specific to the industry, gaming operators must address risks of collusion and chip-dumping. In the former, multiple players coordinate to manipulate an outcome, but even a single player using multiple accounts to accomplish the same goal can be guilty of collusion. Chip-dumping is a form of collusion often used to launder money and involves players intentionally losing to a single person who cashes out.
Beyond financial risks, gaming enterprises face compliance risk. The U.S. has a complex web of state and federal laws that govern online gaming and gambling sites. Legitimate participation often requires being in a certain state, but it can be challenging for operators to verify who players are and where they’re located. While players may not be caught and prosecuted for their deception, online operators can face serious legal and regulatory consequences that put their businesses in jeopardy.
IP Decisioning Data: Insights Without Extra Friction
Gaming operators can reduce their risks by getting to know their customers better. Many have adopted lengthy registration processes to do just that.
However, such processes can add friction to the experience and dissuade legitimate customers from following through. Plus, those intent on committing fraud will simply provide misleading information. For independent, real-time insights on each customer, gaming operators have a solution: integrating IP decisioning data into log-in flows.
IP decisioning involves geolocation and risk data. Because it’s derived from the IP address of a user’s device, the identification is automatic and occurs without customer involvement, keeping the customer experience friction-free. While IP data can’t be falsified by a user, it can be disguised, and learning that a user is disguising his or her data can also be helpful.
Connecting an IP address to a physical, geographic location can provide important insights. Gaming operators can ensure customers are in a place that allows for legal access to a site. Additionally, it can help flag issues such as chip-dumping, as multiple accounts would be tied to a single address and the actor’s behavior could be monitored for some type of collusion.
Further, IP risk data quantifies the risk of malicious activity associated with an IP address. High-risk addresses can be moved through for additional authentication procedures or blocked altogether, helping to keep bad actors out. At the same time, low-risk addresses can gain fast access to their accounts, keeping their customer experience positive.
Various other types of IP-related data can also inform gaming operators. IP traffic data, for instance, can be used to differentiate human participants from bots, which may be used to manipulate game play to the detriment of legitimate wagers. IP connection data allows operators to identify accounts seeking to maintain anonymity, such as from a VPN or an anonymous proxy. If an account suddenly uses an anonymizing connection, rather than previous conventional connections, then it could be a sign it is compromised.
By combining real-time insights associated with geographic location, risk, behavioral, network attribute and proxy data, gaming operators can enhance the authentication processes and customer records, making for a better customer experience while tackling heightened risks.
Leverage IP Decisioning Data
The Covid-19 pandemic accelerated growth for the online gaming and gambling industry, and it appears that players are in no hurry to abandon the format. For operators to continue with confidence, they must leverage resources that can protect the integrity of their systems and maintain the faith of legitimate players. Using real-time IP decisioning data, organizations can mitigate fraud and compliance risks while maintaining an exceptional customer experience.