Over recent years, it’s no secret, the online gaming sector has grown rapidly. It was further catalyzed by the impact of COVID-19, which forced many of the typically land-based consumers online. The digital revolution has undeniably transformed the gambling industry, providing avid punters the opportunity to engage in their favorite game at their own convenience.
This trend is strongly demonstrated in the market statistics; most recent figures show that the online-gambling industry is worth over £5.7 billion in the UK, with more than 30% of the population regularly engaging in online betting.
Seen as a largely positive trend, the rapidly increasing popularity of online gambling does, however, put the industry directly in the fraudsters’ line of fire.
In the UK alone, it’s estimated that up to a million fraud accounts are currently active and targeting operators. When considering the amount of value offered by operators in promotional campaigns, it’s easy to understand why bonus abuse is a multi-billion-pound problem.
Industry commentators believe that igaming platforms will be able to realize their full potential only after they’ve figured out how to stop the fraudsters at first contact, while also providing a frictionless user experience. The operators that do this most effectively will emerge as obvious market leaders.
The status quo
Currently in our industry, bonus abuse is an unfortunate, but also seemingly unavoidable, aspect of the market, as most operators are regular victims, with some losing up to 15% of their net profit annually to fraudsters.
It’s important to remember that online fraud is not exclusive to igaming. A recent study published by fraud-detection specialists Ravelin showed that last year, cybercrimes were up 50% across the board, with 71% of igaming operators having reported an increase in promotion abuse with no clear signs of this slowing down.
A recent case study published by leading operator Kaizen Group indicated that they had lost millions of pounds to bonus abuse in just a few weeks, further highlighting just how much damage this issue is causing our industry.
The continual challenge for operators lies in the fact that the more value offered to players via promotional offers, the better their acquisitions will be. But similarly, the more of a target that makes you for fraud. This is an extremely difficult balance to strike.
One of our industry’s foremost experts in bonus abuse, Ozric Vondervelden (co-founder of Greco), recently stated in an industry roundtable that in the UK, the average value of promos offered to players is roughly £2,500, while in newer markets that are still super-focused on acquisition, such as North America, the value is significantly higher than this at around £18,000.
The industry strikes back
With bonus abuse showing no clear signs of abating, it’s clear that a new approach is needed to defeat the cheats, one that requires a deep understanding of player behavior and value. There also needs to be a greater level of interoperability among igaming brands to avoid data silos emerging within their processing systems and marketing campaigns. The disconnect caused by data silos provides the perfect gap in the process for fraudsters to exploit.
Typically, many operators have introduced systems to combat this, such as “pre-wager” bonuses to help manage the risk, which gives the value retrospectively, significantly reducing opportunity for bonus abuse. They also employ other tactics, such as limiting bonuses to one per household or device and implementing betting limits when playing with bonus money, without damaging the player experience at the same time.
A new approach
However, with new AI-driven tech emerging on the market, things are changing for the better. Operators are can now utilize AI models to create bonuses in which the value is tailored to specific player and full customization in terms of how they’re communicated, what game gets recommended, how and even when they receive that communication. The possibilities are infinite, especially when leveraged for retention purposes as opposed to acquisition.
Just as AI can be used for good, it’s important to remember it can also be used for bad. Up until now, many igaming businesses have relied on manual verification processes when accounts have been flagged as potential fraud risks. Often, this has involved ringing a customer or using a form of photo or video verification to ascertain whether an individual is who they say they are. But now, with the rapid development of AI technologies, such as deepfake video and audio, many of these traditional KYC processes have been rendered ineffective. While these solutions are yet to be widely adopted by fraudsters, there’s little doubt they will be soon.
The uncomfortable truth of bonus abuse is that the igaming industry is itself somewhat to blame for the current situation. Players have become used to these bonuses and furthermore, they have been upskilled into bonus abuse, whether they’re aware of it or not. Some will see it as more opportunistic, especially when every operator is willingly offering huge amounts of value. Naturally, there’s an incentive for players to hop from one operator to the next to exploit this, which promotes this disloyalty, forcing igaming businesses to continue the bonus race and focus on acquisition rather than retention.
When considering all that’s mentioned above, it’s clear that operators will not see any let up in bonus abuse until they start to put an increased focus on the analytics and start aiming bonuses at player retention!
