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Expert Tips for Fraud & Risk Management for Gambling and Gaming

Man gambling at a casino

According to a recent study of the online gambling sector conducted by PR Newswirefraud in the iGaming trade has increased by about 64% annually since the beginning of 2022, emphasizing the need for more robust and advanced security measures than ever before.

This data alone (not to mention other similar studies highlighting similar trends…) underlines the critical point the iGambling industry has reached regarding sophisticated fraud schemes. That’s why, if you own a business in this sector and have a gambling merchant account, you likely face super unique challenges daily.

That’s why I’ve enlisted the help of our payment experts at FastoPayments to put together this quick guide, which contains comprehensive strategies and solutions for managing fraud risks effectively.

Fraud and Risk Management in Gaming and Gambling 101

Risk management in any high-risk industry is important. However, if you work in the gaming industry, it should be at the top of your priorities. You should constantly be monitoring fraud in your transactions (or be using a tool that does it for you).

Why is it such a big deal in the gaming and gambling industries, though? For a few reasons, but mostly due to the bigger tickets (or the high volume of smaller ones).

Additionally, and perhaps most importantly (at least for your customers), most customers of gambling establishments also obviously expect their personal information to be strongly protected. Discreetness is usually the aim here, but they’re also very interested in the safety of their financial data.

It doesn’t stop there, though.

Let’s say you own a sports betting business. After a big win, customers expect you to be able to process transactions almost instantly.

You can lose out on a lot of business if you can’t cater to that due to security or processing risks.

We know this sounds like a lot, but having a good grasp on what needs to be guarded, how to operate lawfully, and how to minimize the risks at hand can make or break an online gambling business these days.

Below, we’ve unpacked some of the most common risks gambling merchants face. If you’re familiar with the main pain points of this tricky sector, then we recommend skipping to the following section and heading straight to the next to learn more about fraud patterns and schemes to look out for. 

Common Types of Fraud in the Gaming Industry

The internet has made a lot of information accessible to…everybody. While this is great, it’s also opened up a lot of opportunities for fraudsters to access never-ending sources of information they wouldn’t otherwise be able to get their hands on.

The most sophisticated and well-thought-out scams often revolve around identity theft or unauthorized transactions. This most commonly manifests in the form of:

  • Account takeovers

  • False chargebacks

  • Bonus abuse

  • Payment fraud

💡 The issues above typically happen whenever a fraudster gets ahold of sensitive data that either has to do with another player (or a non-player), or gains inside information to rig a game. So, pay attention to the security of your website and user information.

Key Fraud Patterns and Schemes in Online Gambling and Gaming

How do you know when something is an issue versus when it’s a one-off thing? Look at fraud patterns.

Knowing what to look out for and being able to recognize these trends in transactions can help you catch on to attempted fraudulent activity in early stages and prevent your business from excessive financial losses (or a hit to your reputation).

To help you figure out what you should be looking for when analyzing your business’s transaction history, we’ve broken down three of the most common schemes used by fraudsters in the online gambling and gaming industry.

Bonus Abuse Fraud

Bonus abuse happens whenever a gambling site offers new players free plays or any other advantages, and scammers exploit it by signing up for an account multiple times

While these types of promotional offers are made to attract new customers, they often put gambling businesses at a higher risk of becoming an attractive fraud target instead.

This is mostly due to the competitive nature of internet gambling. People aiming for illicit gains generally either use stolen identities or complex technology to mask their own to undermine the multi-layered identity management systems. 

Studies have also shown that 80% of online casino scams target gamblers who are new to the game. The best bet for gambling merchants in these cases would be to utilize extensive ID verification systems, AI-driven pattern recognition tools, and winning limits.

Account Takeover and Identity Theft

These two types of fraud go hand-in-hand in some ways. Both involve gaining unauthorized access to someone’s personal data. Fraudsters commit these frauds often by phishing, using hijacking software, or by carrying out brute-force attacks

Once they have gained access, the hackers are able to make unauthorized transactions, retrieve funds, or worst-case scenario, commit identity theft. 

To protect your business and your customers from having their accounts compromised, practice regular security checks, utilize multi-factor authentication, and keep your players informed of the various threats.

Your players, in turn, can do their part as well. Advise them (whether on your website policies or via email communications, to use unique passwords and inform them of common phishing scams in the gambling industry).

Payment Fraud and Chargebacks

This category of fraud might be the one gambling merchants are most familiar with, as this is the “easiest” one to carry out and is widely known across high-risk sectors.

Chargebacks schemes are also often referred to as “friendly fraud,” which happens whenever a purchase is disputed wrongfully, meaning the transaction was legitimate while claimed as fraudulent. These types of scams account for over 70% of all credit card fraud.

This often leaves a mark on the reputation of the merchant, too, as chargeback rates are one of the biggest indicators of a well-managed high-risk business

To prevent your gambling chargeback rates from skyrocketing when operating in the iGaming industry, it’s important to implement risk management techniques such as:

  • Chargeback alerts

  • AI-driven transaction monitoring tools

  • Keeping records of all transactions to analyze user behavior

  • Working with an experienced processor who can help address these instances timely and properly

If you have chargebacks, there are different tools that can help you prevent fraudsters from engaging in fraud based on filters and analytics (both your own analytics and data from other merchants). These kinds of tools and measure can help you, for example, prevent people from using multiple black web credit and debit cards on your website.

Dennis Pedersen FastoPayments

Effective Fraud Prevention Strategies for Gaming and Gambling

As mentioned above, the best way to prepare for instances like this is to join forces with a qualified payment processing provider like FastoPayments.

Experienced processors can equip you with the latest prevention tools for transaction monitoring, chargeback alerts, and data analysis to keep up with the evolving schemes and stay a step ahead.

While the risk assessment of such service providers is honestly incomparable to DIY fraud prevention methods, below you’ll find some steps we would recommend to any merchant in the iGaming sector.

Implementing Advanced Fraud Detection Tools

Saying “you need a good processor to succeed and fight fraudsters” is easier said than done. There are dozens, if not hundreds, of payment service providers claiming to be the best of the best on the market today. So, it’s quite overwhelming to know who to trust, especially if you don’t know what to look for. 

So, our payment experts gathered their ideas and put together the list of green flags below to use as a guide when you’re window shopping for the perfect processor:

  • Processors that leverage AI 

  • Transaction monitoring tools

  • Human capabilities combined with new-age machine learning tools

  • Real-time monitoring

  • 24/7 assistance

  • Behavioral analytics

  • Risk assessments

  • Personal approach to problem solving

  • Extensive KYC procedures for your own good (we all dread them)

Establishing Strong Security Protocols

Robust security protocols are key to safeguard your players’ data, transactions, and your business’s sensitive information. This essentially means that it’s great to work smarter, not harder (although both are needed in most cases, being a part of high-risk industries). 

Often, leveraging all kinds of modern security measures like encryption, firewalls, and intrusion detection systems is the only way to stay ahead of the curve when trying to fight cyber fraud.

Additionally, implementing regular security audits and vulnerability assessments will also help keep the virus that is foul play from spreading and causing detrimental losses.

Employee Training and Awareness Programs

While technology nowadays has far surpassed human capabilities (in some areas, not all), keeping your staff up to date and knowledgeable of the various threats they might face can go a long way, especially for larger corporations.

💡 To prepare your team, carry out a course on the basics of fraud and cybercrime accompanied by real-life examples, and provide regular refreshers to help them stay up-to-date. 

A bad looking guy with some poker chips and money running away

Regulatory Compliance in the Gaming and Gambling Industries

The regulatory environment of the gambling trade is another tricky aspect of fraud prevention, mostly because the standards and requirements for online casinos are complex and often vary across regions.

It’s even harder to ensure you’re operating in adherence with the laws if you own an online gambling site and offer your services in different jurisdictions. 

The regulations applicable for almost all iGaming platforms across the globe (where gambling is legal, of course) include:

  • Gambling licenses

  • General data protection standards

  • AMLS laws

  • Emulating consumer protection requirements

  • Implementing identity authentication practices

  • Age verifications

  • Processing transactions according to PSD2 (The Payment Services Directive 2)

  • Marketing within the Audiovisual Media Service Directive

All of the above, however, doesn’t apply to all gambling sites and regions, which means the process of staying compliant through and through is very case-by-case.

To make your life as a gambling merchant easier, get acquainted with industry experts and work alongside skillful payment service providers that can equip you with the needed tools and information to ensure you’re operating within the laws and regulations. 

At FastoPayments, we’re designing our very own CMS system that’ll help with exactly that—keeping our merchants well-informed and in good standing in this dynamic regulatory environment.

Examples of Effective Fraud Management

What does this look like in real-life?

We’ve helped merchants by conducting detailed risk assessments, after which we usually address the issues (if there are any) from the very root, one by one. This works best if the merchant is quick to reply and takes initiative in getting to the bottom of the matters as well.

Before the application process, we also provide our merchants with a PCI DSS self assessment questionnaire to determine the severity of their case. 

A scammer guy in front of a laptop smiling as he just took money from an account. Show some credit cards in the air around him

Future Trends in Fraud and Risk Management for Gaming and Gambling

As technology and its accessibility evolve, so do the various fraud schemes people use to target other users. That means it’s of utmost importance to keep step with the fraudsters and emerging technologies by utilizing the latest prevention tools to fight fraud.

The estimated global economic impact of fraud in online gaming is $5.5 billion annually, which only goes to show that even nowadays, with the advanced prevention technology designed to prevent financial losses, we’re in a never-ending cycle of trying to outsmart the fraudsters.

So, the need for robust, long-term strategies to predict future fraud trends is more prominent than ever. Here’s what to know about that and how to protect yourself and your business.

Innovations in Fraud Prevention Technology

While it may seem like an unbeatable race to partake in, technology isn’t only favoring the wrongdoers.

The latest advancements made in fraud prevention tools have enabled us to harness predictive analytics using machine learning to oversee the evolving crime as well, giving us leeway to actually fight fraud.

On top of that, high-tech AI payment systems are now capable of processing extremely large amounts of data in real-time which helps tackle fraud attempts head-on.

Blockchain technology and layered biometric authentication have also made their impact on the security of online gambling sites. 

You can set up your own fraud filters without having a third party or an internal fraud system. These might be filters or alerts regarding how many types a person can try with the same email, ID, etc. AI, in general, helps because it goes through your data and figures out which filters are going to be most helpful for your business and risk level.

Dennis Pedersen FastoPayments

FastoPayment’s Gambling Merchant Account Comes with Fraud Protection

At the end of the day, all you can do as a merchant to safeguard your business and your clients is to have a proactive fraud and risk management strategy in place (and work with a payment service provider whose track record speaks for itself, obviously)

So, if you’re on the lookout for the best gambling merchant account and gambling payment gateway services, get a free, no-obligation quote for a high-risk gambling merchant account and payment processing services here.

We’ll review your business information and get back to you ASAP.

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