Fraud represents a growing threat for companies operating in the iGaming and online gambling space. Globally, the digital fraud rate grew 68.6% in iGaming and 29.4% in gambling between 2019–2021.

With seasonal spikes in transaction volumes around major sporting events, constantly evolving regulations, and the challenges of expanding into new markets, iGaming operators need fraud detection they can trust to enable confident business growth. In this high-stakes environment, businesses must have a robust fraud prevention solution tailored to these specific needs. 

The iGaming industry

iGaming is any form of online wagering where the player bets on the outcome of a game or event. The industry includes online gambling and gaming activities such as online casinos, sports betting, and poker. iGaming provides a digital experience for games that have traditionally been offered in brick and mortar establishments, such as casinos.

Online gambling and iGaming are similar, but represent different kinds of businesses in the broader industry. iGaming is the umbrella term encompassing any online gaming or gambling activity, such as app-based casino games, online lotteries, skill gaming, or fantasy sports.

The digitization of gaming and gambling is driving massive global growth, building the iGaming industry into a huge, ever-expanding, $92 billion market full of opportunity—for businesses and fraudsters alike.

Types of fraud in iGaming

Many regions are seeing an iGaming boom, including North America and Europe. In every corner of the globe, fraudsters have devised ways to target security vulnerabilities and attack iGaming operators across the player journey, from login to deposit to withdrawal. Some of the most common fraud schemes that threaten iGaming companies include:

Multiple account fraud: Fraudsters create dozens to hundreds of accounts using fake credentials in order to tilt the balance in their favor online. They use these accounts to perform various cheating and collusion scams, such as:

• Bonus abuse: Fake accounts receive new signup bonuses, coupons, and other promotional offers. These promos are a great way to attract new players, but they can quickly become a financial burden if they aren’t properly restricted. Since bonuses can typically only be used once, fraudsters will set up multiple accounts to get repeat bonuses.
• Affiliate fraud: Deceitful action taken by a third party to derive personal benefit from marketing techniques such as pay-per-lead (PPL) or pay-per-click (PPC) campaigns. For example, using stolen data or payment details from an iGaming provider to drive leads or generate “sales” for their own business; or, by typosquatting. This is when cybercriminals hijack or create domains that are similar to a company’s brand or product names to pick up illegitimate referral traffic from fraudulent redirects, ads, or webpages.
• Gnoming: Player controls multiple accounts that appear to have been created for friends and family, but acts as the sole manager of those accounts. These ‘ghost profiles’ can be used to falsify data or bet placements within games, exploit promotional or sign-on discounts, share points and stolen payment details, or generate winnings outside of the iGaming provider’s regulations. 
• Chip dumping: Commonly used in poker, a gambler will intentionally lose chips or credits to another person at the table in order to transfer the funds to that one player’s account. These players may be colluding to commit money laundering and bonus abuse.

Account takeovers: Fraudsters commonly launch account takeover (ATO) attacks to gain access to legitimate player accounts and make unauthorized transactions. These ATOs compromise platform security and can lead to stolen funds and damage player trust in the business. In fact, recent research from Sift found that 78% of consumers would abandon a brand due to account takeover. 

Payment fraud: Fraudulent transactions create costs and risks for iGaming businesses on multiple fronts, making effective fraud prevention and detection measures crucial. Allowing fraud to proliferate can have significant long-term impacts on operations and brand reputation. Some common forms of payment fraud in iGaming include:

• Phone top-up abuse: This form of payment fraud refers to the use of phone credit or prepaid cards to fund online gambling accounts, often to circumvent gambling regulations. Fraudsters can trick players into making a phone payment to them using social engineering and phishing, going directly into the fraudster’s account.
• Chargebacks and first-party fraud: Chargebacks occur when customers dispute transactions with their bank and request refunds for purchases made with credit or debit cards. In iGaming, this often happens after the customer loses money gambling. First-party fraud is when customers knowingly make purchases but later fraudulently claim they didn’t authorize them in order to get their money back. This is common in online gambling, as some losing gamblers abuse chargebacks this way.

Why trust and safety awareness and fraud prevention matters in iGaming

With regulations frequently changing and new markets emerging, iGaming operators are especially vulnerable to fraud, and a major attack can be catastrophic for growth. Most iGaming businesses face similar challenges when it comes to unblocking high-value players, meeting regulatory requirements, and managing high manual review rates. Having robust fraud prevention in place is critical to:

• Avoid legal or regulatory penalties: Suffering large-scale fraud can bring consequences from regulatory bodies, and these regulations can vary greatly between regions. In the U.S., regulations vary state-to-state and require licenses, whereas in the EU, there’s no universal legislation, resulting in a diverse range of regulations across the region. 
• Prevent financial losses: Minimizing financial losses is a business imperative for iGaming operators. It impacts almost every aspect of the business from profits, relationships, reputation, compliance, and growth. 
• Safeguard player accounts: Players expect their information and transactions to be secure, and safeguarding accounts is imperative for iGaming operators from an ethical, business, legal, and financial standpoint. 
• Retain players: A smooth, seamless user experience boosts retention. Creating a safe and secure online environment gives players confidence to continue playing on the platform. This directly improves customer loyalty, retention, and growth.
• Protect company reputation: Rampant fraud can quickly tarnish a company’s reputation with players, regulators, investors, partners, and employees. This harms brand reputation, a hugely valuable asset in the highly competitive iGaming sector.

Strategies for fraud prevention in iGaming and online gambling

No single solution is able to catch all fraud—a blended approach across the customer lifecycle is ideal. Ongoing assessments also ensure that the digital risk strategy evolves along with new fraud tactics. Broad rules-based approaches may not be able to differentiate between users, causing businesses to have high false positives or require high manual reviews. To protect against fraud, iGaming companies need multilayered prevention strategies in order to:

• Verify identities: Require new players to provide identifying documents and go through Know Your Customer (KYC) verification and Anti-Money Laundering (AML) compliance.
• Analyze behavior: Look for suspicious patterns that may indicate anomalous playing patterns, transactions, or account activities that may indicate bots, collusion, or organized fraud.
• Secure payments: Work closely with payment providers to optimize flows and minimize chargeback risks due to fraud. Leverage technologies like 3D Secure to guard payment transactions.
• Assess regularly: Conduct audits and risk assessments to identify vulnerabilities and address them before they can be exploited. Perform ongoing audits on KYC, AML and other compliance processes to close gaps.
• Train staff: Educate support teams on common fraudster tricks and typical player fraud red flags to identify issues early on. Ensure fraud analysts stay updated on latest trends in gaming fraud typologies through conferences and training programs. 

Protect your business and players with Sift

As iGaming fraud continues to surge globally, operators need reliable solutions that detect fraudsters without blocking real players. By specializing in the unique needs of iGaming, Sift empowers businesses to provide trustworthy player experiences that drive retention over the long-term. 

Payment Protection from Sift helps operators not only prevent fraud, but also accelerate secure player transactions and ensures regulatory compliance. See some of the key ways Sift is uniquely positioned to help your business stay secure as a safe place to play:

• Benefit from a robust iGaming network: Sift’s iGaming fraud prevention solution is designed to address the specific fraud challenges facing iGaming and online gambling. Sift provides iGaming-specific tools built in partnership with top iGaming leaders, and iGaming-specific automation templates to set you up for success.
• Go beyond fraud prevention to drive revenue and the player experience: With Sift, operators can reduce manual reviews by up to 60% while still approving legitimate users through machine learning-driven automation—creating a seamless experience for valuable players. Sift’s platform flexibility and industry expertise drive business expansion while addressing regulatory requirements.
• Simplify the migration to machine learning: Lean on Sift’s deep experience migrating businesses to real-time machine learning. We provide expert integration support to help you get up and running quickly with our simple-to-use platform.

Sift helps leaders in the iGaming industry secure payments during massive sporting events like the Super Bowl and help them expand into new markets. In fact, the top iGaming companies that account for 75% of the U.S. market rely on Sift to gain a competitive advantage. Globally, Sift secures more than $45 billion in iGaming and online gambling annually, representing 468 million transactions.

Learn more about how Sift Payment Protection can help your iGaming business secure transactions, improve the player experience, meet regulatory requirements, and help you expand securely into new markets.

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*** This is a Security Bloggers Network syndicated blog from Sift Blog authored by Sift Trust and Safety Team. Read the original post at: https://blog.sift.com/preventing-fraud-in-the-igaming-industry/?utm_source=rss&utm_medium=rss&utm_campaign=preventing-fraud-in-the-igaming-industry