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IN-DEPTH 5 July 2018
Key trends in online gambling for 2018 and beyond
Dramatic changes are in store for the online gambling industry which will no doubt impact their fraud management teams. New operators are cropping up even as existing operators consolidate. This, along with strong market growth and new operating geographies (including the recently opened up online sports betting market in the United States), significantly increases the competitive pressure on gambling operators. We’re in a situation where every new player counts and every new VIP player is crucial to the success of the business.
By Iovation

Players habits are also significantly shifting. As players move from playing on a desktop computer to a mobile device, there is less tolerance for friction caused by security and fraud prevention measures. Players are also now playing on multiple devices (phone, tablet, laptop, desktop) and expect a consistent experience across all devices.

Techniques employed by fraudsters also continue to evolve and are growing increasingly complex. Fraud activities are no longer limited to just using stolen credit cards or other kinds of payment fraud. Advanced computer tools and techniques are being utilized by fraudsters worldwide. Detecting and preventing their efforts now requires sophisticated technologies like machine learning and artificial intelligence.

Finally, changes to online data privacy regulations in the UK and European Union are the largest in a generation and potentially could impact your security and fraud prevention activities by limiting the type of data that you can collect about your players.

What is the impact of these trends? They are creating an environment where the fraud management team can no longer work in relative isolation while focused on fraud-only activities like reducing chargebacks and other types of targeted fraud. Instead, by working closely and coordinating with marketing, sales, product/business owner, and data security teams, the fraud prevention team can make a broader impact on the business such as improved user experience, increased player account security, and revenue growth.

Changing Habits of Players

Gambling on the go from mobile devices is on the rise. According to Online Gambling Quarterly, 61% of gambling operators’ revenue comes via mobile devices. Furthermore, 72% of betting stakes are from mobile devices. There are several important implications here.

At iovation, we also are seeing this move towards mobile device.

First, mobile players demand convenience and ease of use. Having to login each time by typing the traditional username/password is often unacceptable to these users. Even with password managers, the extra seconds needed to lookup/copy/paste a username and password is often enough of a hindrance that a player will switch to a different game that is easier to use yet incorporates more advanced protections like biometric identification.

Second, mobile players are not using only their mobile phones for these games. They are also using devices such as their tablet, work laptop, or home computer. Having a consistent user experience across these different platforms is vital to the overall user experience.

Why does this matter to fraud prevention specialists? The most obvious impact is that fraud prevention technologies used by the operator must not only support multiple playing platforms, but must be able to track fraud committed across all platforms. Tracking fraud across multiple devices is difficult without proper device-fingerprinting fraud prevention technology. These tools allow for devices to be identified and then later recognized regardless of which user is actually using the device.

Growing Fraudster Sophistication

Even though fraudsters and criminals continue to utilize payment fraud resulting in expensive chargebacks as well as increased credit card processing expenses, they also utilize a number of other fraud practices.

Fraudsters perpetrate a wide range of fraud and in-game social abuses including credit card fraud, fraudulent deposits, chargebacks, cheating and collusion, chip dumping, promotion and bonus abuse, email spam, money laundering and account takeover. Despite gambling sites’ efforts to detect suspicious players, Internet-savvy criminals have learned how to mask their true identity by changing account information to circumvent conventional methods of fraud detection such as IP address and geo-location validation, third-party credit verification, and other tools that monitor and analyze player activities such as winning percentage, hands played, and who they’ve won and lost to.

As fraudsters routinely change identities, many online gambling sites are being abused by the same people over and over again without even knowing. Unfortunately, for online casinos that lack the ability to identify fraudulent computers, even if a fraudulent account is detected and shut down, there’s nothing to prevent the fraudsters from immediately creating a new account under another identity.

As fraudsters continue to hide behind the Internet’s built-in anonymity, identity and financially-based fraud management systems alone are not sufficient in catching sophisticated fraud and abuse. The inability to identify fraudsters sitting alongside legitimate players at a virtual poker table underscores the growing need for online casinos to deploy more effective solutions that look at information independent of what data is supplied by users.

In order to effectively combat identity theft, online gambling sites must move beyond relying almost solely on personal information for fraud analysis. As identity-based fraud management systems continue to crunch the same identity data in a variety of ways, an entirely different technique, one that looks at information independent of what is provided by the user, creates significant value and uplift in the fight against fraud.

A device fingerprinting fraud prevention solution focuses on the device—not the person—to identify and re-identify a user. This kind of device-centric solution provides online gambling/gaming sites with unique insight into account creation and relationships and exposes fraud that is invisible to other tools. This type of solution has the added advantage in that it minimizes, and often eliminates, the need for storing and processing personal information which is a hot topic currently in the UK and European Union.

Better User Experience

Most fraud and risk departments are considered cost centers with little influence to increase revenue. If anything, sales and marketing groups may occasionally get frustrated with the often conservative approach of a fraud team when it comes to rejecting new players obtained from a marketing campaign because of risk concerns.

However, the fraud team has a wealth of data at their disposal that is beneficial for improving user experience (of interest to the sales and marketing teams), but also useful to the business data security team to improve player account security.

Frictionless, Flexible, and Secure Login

As mentioned earlier, as more players utilize on the go mobile devices their tolerance for repeatedly entering usernames/passwords is significantly reduced. From a user experience perspective, it is important to get players into the game and playing as quickly as possible, while not jeopardizing the security of their accounts. Furthermore, as these same players move from one device platform to another, they have an expectation that ease of login on one platform should be available on all.

A device fingerprinting solution can help improve this aspect of user experience. When a specific device is paired with a user account, and then is reliably and accurately recognized as the same device in the future, traditional username/password login procedures can be safely skipped as long as there are no device risk indicators (information that a fraud prevention tool can provide) present.

Further enhancements to the user experience can occur by incorporating flexible and configurable multifactor authentication technology. This gives every player the ability to determine how much security they want to incorporate for activities such as logging in, playing a game, etc. These additional security factors could include things such as PINs, biometrics sensors, or even the presence of a trusted bluetooth device.

Identifying VIP Players

One of the best ways to differentiate user experience from the competition is to offer them rewards, incentives, and promotions. However, fraudsters are aware of this and often abuse these types of programs. Device fingerprinting coupled with sophisticated machine learning capabilities allows one to predict (refer to Figure 3) the trustworthiness or risk for any online transaction just by comparing device characteristics to billions of other past transactions that have similar characteristics. With this information, you have the ability to offer lucrative incentives to trustworthy VIPs and limit the incentives for suspected fraudsters. Conclusions

Fraud prevention teams should no longer be siloed in their efforts. Nor should they be considered just a cost center focused on minimizing fraud losses. When using technologies such as device fingerprinting, the fraud prevention group possesses data and technologies that can help the organization achieve business objectives such as growing market share and revenue, increasing player retention and new player acquisition, and even improving player account security.
DISCUSS THIS ARTICLE
IN-DEPTH 16 August 2019
Roundtable: David vs Goliath – Can startups really disrupt the industry?

(AL) Alexander Levchenko – CEO, Evoplay Entertainment

Alexander Levchenko is CEO of innovative game development studio Evoplay Entertainment. He has overseen the rapid expansion of the company since it was founded in early 2017 with the vision of revolutionising the player experience.

(RL) Ruben Loeches – CMO, R Franco

Rubén Loeches is CMO at R. Franco Group, Spain’s most established multinational gaming supplier and solutions provider. With over 10 years working in the gambling, betting and online gaming industries, he is skilled in operations management and marketing strategy.

(JB) Julian Buhagiar – Co-Founder, RB Capital:

Julian Buhagiar is an investor, CEO & board director to multiple ventures in gaming, fintech & media markets. He has lead investments, M & As and exits to date in excess of $370m.

(DM) Dominic Mansour – CEO, Bragg Gaming Group:

Dominic Mansour has an extensive background of nearly 20 years in the gaming and lottery industry. He has a deep understanding of the lottery secto,r having been CEO at the UK-based Health Lottery, as well as building bingos.com from scratch, which he sold to NetPlay TV plc.

What does it take for a startup to make waves in gaming?

DM: On the one hand, it’s a bit like brand marketing; you build an identity, a reputation and a strategy. When you know what you stand for, you then do your best to get heard. That doesn’t necessarily require a TV commercial but ensuring whatever you do stands out from the crowd. Then you have to get out there and talk to people about it. 

AL: Being better than the competition is no longer enough; if you’re small, new and want to make a difference – you have to turn the industry on its head. Those looking to make waves need to come up with a new concept or a ground-breaking solution. Take Elon Musk, he didn’t found Tesla to improve the existing electric cars on the market, he founded it to create the industry’s first mass-market electric sports car. It’s the same for online gaming; if you want to make waves as a startup, you have to bring something revolutionary to the table.

JB: Unique IP is key, particularly in emerging (non-EU) markets. As does the ability to release products on time, with minimal downtime and/or turnaround time when issues inevitably occur. A good salesforce capable of rapidly striking partnerships with the right players is vital, as is not getting bogged down too early on in legal, operational and admin red tape.

How easy it for startups to bring their ideas to life? How do they attract capital?

AL: It depends on the people and ideas behind the startup. Of course – the wave of ‘unicorns’ is not what it used to be. Some time ago the hype was a lot greater in terms of investing in startups, but that’s changed now. Investors now want more detail – and even more importantly, to evaluate whether the startup has the capacity (as well as the vision) to solve the problem it set out to address. That’s not to say investors are no longer interested in startups – they certainly are – but now more than ever, it’s important for startups to understand their audience as well as dreaming big.

JB: To get to market quickly, you need a great but small, team. If slots or sportsbook, the mathematical engine and UX/UI are crucial. Having a lean, agile dev team that can rapidly turn wire framing and mathematical logic into product is essential. Paying more for the right team is sometimes necessary, especially when good resources are scarce (here’s looking at you, Malta and Gibraltar).

Building capital is a different beast altogether. You won’t be able to secure any funding until you have a working proof of concept and, even then, capital is likely to be drip fed. Be prepared to get a family and friends round early on to deliver a ‘kick-ass’ demo, then start looking at early-stage VCs that specialise in growth-stage assets.

How do you react when you see startups coming in with their plan for disruption?

RL: We welcome the innovation and fresh thinking startups bring. This is particularly the case in Latin America, with a market still in its infancy. One area we’d especially like to see startups making waves is in the slot development sector. Latin America is a young market that needs local innovation suited to its unique conditions – especially in regard to mobile gaming.

Operators eyeing the market have Europe‐focused core products, which creates a struggle to work to the requirements of players and regulators. To succeed there, it has become more important than ever to work with those with a knowhow of the local area to adapt products and games to besuitable from the off; we welcome the chance for local talent to develop and grow.

Do you think it’s easier for established companies to innovate and establish new ideas? 

AL: From a financial perspective, yes. It is without a doubt easier for incumbent companies to establish a pipeline of innovation via their R & D departments, as well as having the tools to hand for data gathering and analysis.

But it stops there. Startups hold court in every other way. Not only are they flexible, they can easily switch from one idea to another, change strategy instantly as the market demands and easily move team members around. Established companies know this – and this is why we’re seeing an emerging trend for established companies to acquire small, innovative online gaming start-ups. They have the right resources and unique ideas, as well as the ability to bring a fresh approach to businesses’ thinking.

RL: For me, it’s always going to be established companies. Only with the resources, industry experience and know‐how can a company apply technology and services that truly make a difference. Of course there are exceptions. But when it comes to providing a platform that can be approved by regulators across multiple markets – as well as suiting an operators’ multiple jurisdictions – it is simply impossible for a couple of young bright minds with a few million behind them to get this done.

DM: I actually think it’s harder for established companies. It’s key to differentiate between having a good idea and executing one. That’s where the big corporates struggle most. They’re full of amazing people with all sorts of great ideas but getting them through systems and processes is nearly impossible.

Is it essential to patent-protect innovative products?

AL: It’s a very interesting subject. If we take IT for example – patents can actually become a block to the evolutionary process within the industry. Of course, getting a patent future proofs yourself from the competition copying your concept but, having said that, if you’re looking to protect yourself from someone more creative, smarter and agile, you’ve probably lost the battle already!

In our industry everything is moving faster and research takes less time than the development itself. No matter how good you are at copy pasting, you can’t copy Google or Netflix. The most important thing is not the tech itself but rather its ‘use-case’ – or in other words, does it solve what it’s meant to solve? Competition is healthy and the key to innovation. If you spend your whole time looking behind you, you’ll never be able move forwards.

JB: Tricky question, and one that depends on what and where you launch this IP. It can be difficult to patent mathematical engines and logic, mostly because they’re re-treading prior art. Branding, artwork and UX is more important and can easily be copied, but the territories you launch will determine how protectable your IP will be once patented. US/EU/Japan is easy but expensive to protect in. But China/South East Asia is a nightmare to cover adequately. Specialised patent lawyers with experience in software, and ideally gaming, can help you better.

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