This year marked the first Super Bowl to be played in a state with legal sports betting, and it was one to remember, both for the high stakes on the field, as well as the high stakes off it.
According to FanDuel, more than 50,000 bets were placed every second during the peak of Sunday’s game, with over 100 million sports betting transactions made across the dramatic weekend. In the end, it wasn’t only the Chiefs who emerged victorious on the night—in fact, DraftKings has confirmed that it paid out $2.68 million to one bettor alone.
It’s jut the latest big night in the world of iGaming, which has seen incredible growth in the past five years. Ever since the Supreme Court overturned a federal ban on sports betting in 2018, the sector has gone from strength-to-strength. Right now, the market is valued at more than $3 billion, with sports betting legalized in a total of 36 states and with others, such as California now seriously considering also following suit. As such, growth in the sector shows no sign of slowing, with Morgan Stanley estimating it could be worth $7 billion by 2025.
THE GAME STARTS NOW
The rise of the iGaming sector is providing customers with new and exciting ways to engage with their favorite sports. Sadly, this growth has also been beneficial for online criminals, who have been able to target online sports betting operators with concerted and effective fraud attempts.
According to our research, the rate of fraudulent signups iGaming can be as high as 26 percent, which far surpasses rates seen in other industries like eCommerce or entertainment, underlining the problem at hand.
For the last few years at SEON, we’ve been working with iGaming businesses in the U.S., helping them to tackle this growing challenge. It’s an experience that has opened my eyes to the different ways fraud is impacting the iGaming sector.What I’ve learned is that the sector faces a multi-faceted fraud problem, which comes in many shapes and sizes. Thankfully, the good news is that businesses in the field finally have tools at their disposal to fight back. However, the need to implement these approaches has never been greater than it is now.
FAKE USERS, REAL LOSSES
Fraud in the iGaming sector can take many forms, but there are techniques that online fraudsters are really exploiting right now o get over on providers. Let’s start with the use of synthetic IDs, which is perhaps the most pressing issue the sector must tackle. According to the Federal U.S. Reserve, the usage of synthetic IDs grew by 85-95 percent in 2019 alone. Sadly, fraudsters often use these fake IDs to bypass basic know-your-customer (KYC) checks easily and claim promotional offers they aren’t entitled to.
By signing up with synthetic IDs and claiming offers they aren’t entitled to, fraudsters are engaging in bonus abuse. While this might not sound like the ‘crime of the century’, it’s an incredibly widespread and costly problem.
In fact, our research shows that up to 15 percent of the online gaming industry’s gross revenue is currently being lost to this form of fraud. The problem has been greatly exacerbated by the propensity of iGaming providers to offer sizable “new player” bonus promotions when looking to grow their market share.
Worse still, synthetic IDs normally contain some real-person information, which is often stolen, and used without the victim’s cnsent. Not only does this make it harder for KYC systems to flag the fraud attempt, but it creates more demand for stolen personal information across the darkest corners of the internet. Of course, iGaming providers could look to implement more robust KYC protocols to try and mitigate the problem, but in doing so, they then run the risk of ladening the customer onboarding process with more friction.
MAKING A TOUGH PLAY
Herein lies one of the main issues that iGaming providers face when it comes to combating online fraud: Companies must carefully tow the line between increased security and limiting unnecessary friction.
Given the competitiveness of the iGaming space, many providers have entirely rational concerns about losing customers to competitors should they adopt measures that affect the customer journey. This has led some operators to seemingly accept high fraud rates as an unwelcomed, but unavoidable cost of business.
However, this unhappy compromise is becoming less viable by the day. For one, rates of bonus abuse, and multi account fraud are rising to unmanageable levels. What’s more, potentially further damaging forms of deception, such as self-exclusion fraud are now increasingly prominent. This problem sees fraudsters leveraging the well-intentioned self-exclusion policies of iGaming providers back against them, to blackmail operators into refunding lost bets at the risk of otherwise facing big fines.
Up until now, U.S. iGaming businesses, which operate under much less stringent regulations than their European counterparts, have been able to effectively sidestep this issue.
However, as more regulations are imposed on the sector on account of its increasingly mainstream adoption, it seems inevitable that the problem will soon make its way across the Atlantic. If this is to happen, not only will iGaming businesses be vulnerable to large fines, but the sector could face significant reputational damage, on account of the perceived inability of companies from stopping problematic gamers accessing their platform.
MOVING ON FROM MANUAL
That’s why it’s now time for the iGaming sector to redouble efforts to prevent fraud, and to implement modern online fraud prevention systems suitable to the task at hand. For some operators, this will mean moving on from manual verification processes, which have become increasingly time and cost inefficient, and far more susceptible to being outsmarted by rapidly developing AI-based technologies, such as deep fake video and audio.
Simply put, it’s time for the sector to stop gambling on its safety.
Instead, iGaming providers should look towards fraud prevention experts who are leveraging the power of AI and machine learning to deliver solutions that offer enhanced fraud prevention performance, while not disrupting any aspect of the customer onboarding process.
Thankfully, there are now solutions like this coming to market, such as the one we provide at SEON, which enables robust KYC checks in real-time, giving providers the confidence to approve or deny new user registrations in a matter of seconds.
For more information about SEON, please visit: https://www.seon.io/