Friendly Fraud: How Can Operators Prevent It?

Friendly Fraud: How Can Operators Prevent It?

Fraudulent actions in the online gambling industry are among the hottest topics in financial news and articles. Online casinos should not only care about their customers but, to some extent, protect themselves from them, namely from users’ fraudulent manipulation.

Friendly fraud is one of the most frequent types of scams done by casino players. In this article, you will find out what friendly fraud is and how iGaming operators can prevent it.

Is friendly fraud really “friendly”?

Although this term has the word “friendly” in its name, there is nothing positive about it. It has several names, however. It can also be called chargeback or first-party fraud.

The procedure of friendly fraud in gambling is the following: a customer makes a request to the financial establishment after depositing on the casino website, saying that he or she isn’t aware of this transaction. To make a long story short, a player gets the service without actually paying for it. It often happens when a player fails to win and loses his or her bankroll. This leads to regret and the desire to get money back. What is more interesting, such cases also frequently happen with problem gamblers. 

However, there are also other instances of friendly fraud. For example, when minors deposit on gambling websites, using parents’ credit and debit cards. After adults see the history of payments with casino deposits, they contact banks to cancel the transaction and ask for a chargeback.

Of course, friendly fraud considerably harms the operators’ GGR. It has become a headache for them. It is worth mentioning that sometimes, it is referred to big sums of transactions. Moreover, the investigations of such fraudulent actions lead to considerable expenditures for both gambling and financial companies. It is very difficult for operators to prove their point and provide evidence that the fraud has occurred. Customers use this as an opportunity to make such machinations multiple times as they usually get their money back. Besides, friendly fraud is among the major reasons for payment services providers not to enter into partnerships with gambling firms as they generate constant risks.

According to the recent data, one in twenty accounts is a fraud, so merchants frequently face problems connected with unfair customers. The main reason why this type of fraud still exists is that it isn’t so easy to identify it. However, operators still need to take measures to fight against it.

It is of high importance for operators to protect their business from friendly fraud chargebacks as well as to keep protecting their clients at the same time. If gambling companies don’t stop fraud, it may lead to the aggravation of the industry image as a participant of the financial system.

Sure-fire formulas to put an end to friendly fraud

Although it may seem impossible to overcome friendly fraud, there are some measures, which can at least decrease the number of such cases. Here are some of them.

KYC is the first step

Know your customer or KYC won’t solve the problem to the full extent but will help to prevent friendly fraud. The best solution here is to use successful cases and already developed schemes for this. In other words, gambling companies should follow the example of those verticals where fraud is frequent and adopt their tools for fighting it.

Of course, the first industry that crosses mind is the financial sector. Financial services providers are often at high risk and have to stay compliant with a set of requirements. Customer checks and having all the necessary information about clients allow them to resist fraudsters.

KYC practices in various jurisdictions are often discussed in the gambling online magazine Login Casino. They can help not only with preventing money laundering and terrorism financing but also can become an effective tool when operators defend their business from friendly fraud chargebacks. By checking a user’s identity, gambling companies can find out about their background – whether they have been involved in financial crimes before. Frequently, fraudsters try to hide behind other individuals, and the KYC is the way to reveal their identity and detect suspicious cases.

However, it is important to remember that there always should be a balance between getting enough information about customers and remaining a user-friendly service.

Keep a blacklist of users

Many online casino customers engaged in fraud repeat such actions. That is why iGaming providers should keep an eye on those who have already been involved in friendly fraud. The blacklist is a way out here as it can help to stop scammers.

The procedure of creating a blacklist consists of several steps. The first one is to gather details about customers. The availability of information about them allows analyzing it and detecting the cases, which require further investigation. In other words, operators should pay attention to suspicious users’ behavior and track them. These data are used for blacklists and become signals when there is an alert about the customer.

Machine learning and AI can help

Friendly fraud is a risk that is why human resources aren’t always enough to solve this problem. Cutting-edge technologies become the solution very often as they help to process data quickly and effectively. The power of artificial intelligence can’t be underestimated in this vertical. AI automates the procedure of verification, which cuts down both time spent on this and expenses.

In addition to this, artificial intelligence is the best tool in terms of analyzing customers’ behavior. What is more important, this technology eliminates mistakes in the analysis, which can happen because of the human factor. When friendly fraud happens, AI identifies it immediately, without any delays.

Another advantage of using technology-based solutions is that they not only detect such cases but also gather information on how this has happened. Having such detailed information, iGaming services providers can enhance security measures and protect themselves from possible fraud.

The scenario used to defend a business from friendly fraud depends on a company, its scale, and technical capability. However, the most common practices also applied by other industries, which frequently face fraud, are always worthy of consideration.

Read more: Best iGaming Aggregators

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