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Put the Odds in Your Favor — Get Ahead of 2021 iGaming Fraud Trends

TransUnion
Blog Post02/17/2021
Business Fraud and Identity Management

The global COVID-19 pandemic has wreaked havoc on the iGaming industry. Government actions to stem the spread of the virus — including stay-at-home orders, public gathering bans and retail operation limitations — caused serious economic fallout. Subsequently, gaming industry revenue has shrunk dramatically thanks to a combination of these restrictions, consumer financial hardship, and the loss of major live sports betting.

Like other industries, the recovery of the iGaming industry has been mixed. While land-based gaming has yet to fully recover, online gaming was a bright spot — digital transactions grew 19% over the past 12 months.1 Take the US, for example, where gross gaming revenue (GGR) for online gaming grew 203% year-over-year through August, compared to a 39% decline in the industry overall.2

Fraud trends to watch for going forward

 Identity tends to be the prime source of fraud in online gambling. In fact, we saw a 43% increase in online gambling identity fraud over the past 12 months. We analysed the online gambling fraud trends that evolved in 2020 and will likely continue to impact operators in 2021 and beyond in our new report.

All fraud is local

While overall risky transactions in online gambling grew 9% in 2020, the specific types of fraud varied by region. Each jurisdiction presents operators with dynamic regulatory requirements and unique fraud challenges as they strive to protect players, verify identities and secure transactions.

We see the broad challenges iGaming operators face while trying to grow their business globally, as evidenced by the variety of transactions with the highest reported fraud, including:

  • Europe & UK — 29% Customer requested exclusion
  • US — 42% Credit card fraud
  • South Africa — 40% synthetic identity fraud
  • Asia-Pacific — 31% promotion abuse

Fraud follows the path of least resistance

One thing the COVID-19 pandemic showed us is fraudsters move quickly to exploit new opportunities. We saw this in the UK where new regulations banning the use of credit cards resulted in a 16% drop in credit card fraud but also a 169% increase in ACH/debit fraud.

To overcome the opportunity-driven nature of fraudsters and keep up with continuously evolving regulations, operators need to consider a more integrated approach to cultivating player trust and profitable growth.

Successful online gaming operators seek to build a foundation of trust

Following a year of unprecedented disruption and growth, online gaming operators should consider investments that maximize their flexibility to grow while instilling trust with customers and regulators alike.

  • Adopt mobile-first player account management
    Mobile represented 68% of all online gaming transactions in 2020.3 While that’s a slight drop from the previous year, mobile is clearly the preferred channel for online gamers. Operators should capitalize by putting smartphones at the center of their account management processes. Most agree since 76% of operators believe it’s likely biometrics will be the dominant form of authentication in the next five years.4
  • Secure the player journey while providing a great experience
    Onboarding players can be time-consuming, and the goal is to speed players through to games as quickly as possible. In fact, 83% of operators believe smooth digital transactions have become essential to business survival, rather than merely a competitive edge.5 To streamline onboarding, operators should consider in-line verification and authentication processes to help ensure friction-right, secure player journeys and reduce customer abandonment.
  • Implement regulatory compliance-by-design
    Depending on the jurisdiction, operators have to verify geographic compliance, block players who self-excluded, consider affordability when accepting deposits, and monitor accounts for possible money laundering. In an industry where competitive success often depends on removing barriers to play, operators need a flexible framework for addressing regulatory stipulations. A good bet is considering an account verification and authentication framework that leverages accurate identity information and artificial intelligence to identity risk while getting good players through quickly. 

2021 comes in to focus

Despite the rollout of the COVID-19 vaccine, it may take all of 2021 (or longer) for land-based gaming to fully recover. That’s going to put enormous pressure on online gaming operators to maximize the opportunity of new players and those who may move online. Operators need to work as quickly as possible to implement identity verification and authentication solutions to onboard new players while avoiding friction that can lead to abandonment. Savvy, successful operators are going to be ready to capture new growth.

 

Download the full 2021 Online Gaming Fraud report  now.

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