Online gambling sees suspected fraud trends grow nearly 55% YoY during pandemic

TransUnion’s latest quarterly analysis of global online fraud trends found that since the COVID-19 pandemic began, fraudsters are increasing their rate of digital schemes against businesses, including online gaming and gambling.

In its recent Global Consumer Pulse Study, the company analyzed different industries for a change in the percent of suspected digital fraud attempts against them, comparing the periods of March 11, 2019-March 10, 2020 and March 11, 2020-March 10, 2021. Online gambling saw a growth of 54.81%, with “Policy/License Agreement Violations” found as the top type of fraud; and there was a 48.40% increase in the case of online gaming, being Gold Farming the top type of fraud.

Based on intelligence from billions of transactions and more than 40,000 websites and apps contained in its TransUnion TruValidate solution, the firm documented a 19% growth in transactions among its global iGaming customers from 2019 to 2020, and recently researched its fraud impact in a special report. It determined that its online gambling customers experienced a 9% increase in the rate of suspected fraud when comparing 2019 to 2020 among the 576 million iGaming transactions TransUnion analyzed for risk indicators last year. 

Despite it being one of the hottest growing industries, TransUnion observed a decrease in the iGaming mobile transaction rate for the first time since at least 2016. However, iGaming on mobile devices is still much higher than desktops with the percent of online gambling transactions coming from mobile devices at 69%.

In order to grasp further insights and better understand these findings, Yogonet spoke with Melissa Gaddis, Senior Director of Customer Success, Global Fraud Solutions at TransUnion.

In a previous report last year, when TransUnion compared the periods of March 11-May 18 and May 19-July 25, with businesses starting to reopen amid the pandemic, online gambling saw nearly no changes in terms of suspected fraud, and there was even a slight decline of 3% in the case of online gaming. Why do you think we are now seeing significant growth of 54.81% in gambling, and 48.40% in gaming?

The factors which we believe led to the slight decrease in fraud trends in the gambling and gaming space initially are likely also at play with the increase we’re seeing now. In the summer of 2020, we started to see economies open up slightly. It wasn’t a sustained trend with countries shutting down again or reinstating stricter restrictions as the pandemic conditions worsened before improving. Therefore, individuals who may be a casual gamer, but who looked to circumvent bonus restrictions, likely had larger concerns with layoffs, furloughs and significant job changes and weren’t spending as much time online. Further, as every company moved online fraudsters who may have typically focused on the gaming/gambling arena saw an opportunity to exploit security gaps with businesses trying to pivot quickly to primarily online transactions that historically were via brick and mortar experiences. Perpetuating fraud with retailers, financial institutions, insurance companies, etc. had greater revenue opportunity with potentially fewer restrictions as the quick shift to online didn’t automatically include the strict fraud protections one expects with online transactions. Basically, fraudsters shifted their focus. Now, however, we are seeing brick and mortar businesses open more fully and a year after the quick shift to the full online business model businesses have been able to adjust their fraud and security solutions to protect their businesses and consumers making it less appealing for fraudsters to target them so they are shifting back to tried and true opportunities.

Bonus abuse and gold farming were the top types of fraud for these areas in the previous report. Which are the possible reasons why we are adding “Policy/License Agreement Violations” in the case of gambling, and why specifically Sri Lanka as the top country for suspected fraud origination?  

Bonus abuse and gold farming remain significant issues for the gambling and iGaming industries as they enable the monetization of the fraud efforts. We are, however, seeing increased issues with policy/license agreement violations as regulatory environments shift and/or open up allowing or restricting gambling in specific jurisdictions but not others which requires gambling operators ensure their online players are in allowed geographies. There isn’t a specific reason why we are seeing a higher percentage of fraud coming from Sri Lanka at this time. This shifts with each report we run and just speaks to the trends at that time.

TransUnion’s 2021 Global iGaming Fraud Trends found a 19% growth in transactions among its global iGaming customers from 2019 to 2020, and a 9% increase in the rate of suspected fraud. Could you mention any other key findings from the report and potential explanations for these numbers? What could we expect in terms of fraud trends given the decrease in the iGaming mobile transaction rate, as more people started to use desktop devices amid the pandemic?

First, we don’t believe we will continue to see a decrease in mobile transaction rates long-term. People largely spent the last year at home which afforded them easier and more access to desktop devices, but this will shift again as countries open up more fully and travel becomes more prevalent. Historically we saw significant increases in the use of mobile devices and we expect trends to once again move that way in the future. 

How would you assess the technologies that are being used, strengthened or developed in order to mitigate a potential growth of fraud in a fast growing market such as online gaming and gambling, worldwide and particularly in the US? For instance, IA, biometrics, digital identity systems, blockchain.

Pattern recognition is a major factor in fraud detection. Historical data shows patterns of how customers behave, but many companies don't have the resources to sift through historical data and follow pattern recognition to detect fraud in digital transactions. That's the role of machine learning (ML), which is a form of AI. According to the TransUnion-sponsored Economist Intelligence report, "AI has become an essential engine of digital transformation thanks to recent improvements in algorithmic performance, increased computer processing power, and a proliferation of real-world use cases, demonstrating its potential in diverse contexts and settings from insurance and banking to e-commerce." Companies are using AI to detect behavior patterns, and this is where they are seeing the greatest benefits to decrease fraud and improve overall security. Biometrics is important because it eliminates the username/password combination. Although there are some risks involved with biometrics they continue to be safer than other forms of authentication. 

What are your outlooks or expectations for these uses and fraud trends in the coming months?

We believe we are going to start to see a stabilization across industries as more companies either move back into their normal operating models. Those who maintain a stronger online presence are expected to continue to enhance the security measures they need in place. This practice improves the experience for their good customers while adding friction and stopping fraudulent activity.