Operators vs fraudsters: whose side are e-wallets and affiliates on?
While undoubtedly valuable to igaming operators, wallet providers and affiliates are at times enabling behaviour such as bonus abuse, says MuchBetter’s Jens Bader.
E-wallets serve an invaluable purpose in igaming, acting as a conduit for operators to receive funds and for players to withdraw their winnings. However, they have also become a principle enabler of fraud in recent years and a key weapon in the arsenal of every fraudster.
While no one disputes their continued importance, operators are starting to question whether wallets have swung too far in favour of users and whether wallet providers and affiliates are doing enough to prevent activity such as bonus abuse.
A more extreme question might be to ask whose side these industries are really on, since e-wallets and affiliates appear to be benefiting as much as anyone from the current status quo.
What is the e-wallet problem?
Historically, e-wallets were designed to put their users’ needs first, not the needs of operators. Their main features are customer-centred benefits, such as funding the wallet in real-time, moving money easily into and out of gaming accounts and using an attached prepaid card to use the account anywhere.
While it could be argued that a rising tide lifts all boats, and that happier players make for more loyal and valuable customers, this is only true up to a point. Indeed, the use of e-wallets has created massive issues for operators including money laundering, collusion and bonus abuse.
Of all fraudulent activity, bonus abuse might be the clearest example of how e-wallets can hurt operators. Bonus abuse involves players creating fraudulent accounts for the sole purpose of using promotional offers that are designed to acquire new players, without ever, or only as part of the wider scam, placing bets with their own money.
When these codes are used in conjunction with bogus player accounts, gaming platforms are directly losing funds that they invested into acquiring new players. Anecdotal evidence suggests that bonuses can amount to as much as 35% of gross revenue spend and bonus abuse can cost as much as 15% of gross revenue.
Bonus abuse is further exacerbated by fraudsters who scale up their activity by creating dozens of fake accounts. Most use e-wallets because they allow users to create multiple anonymous accounts from a single device and fund them by numerous methods without any transparency to the operator.
Furthermore, since a single wallet can be funded by numerous accounts, possibly hundreds, it becomes impossible to know their true owners. In theory, this anonymity may also enable banned users to create new accounts by proxy, making it even harder for operators to clamp down on bonus abuse.
So what exactly is preventing e-wallets from trying to stop this behaviour? The problem is that, other than avoiding relatively small fines, there really is no motivation for wallets to really clamp down on activity like bonus abuse.
In fact, e-wallets often stand to benefit through the massive transaction fees generated by this behaviour. Worse still, some wallets actively encourage their users to make payments/transfers as often as possible, usually via cashback incentives.
While this is not illegal by any means, some would call it ‘wallet operator fraud’, since they are gaming the system and encouraging users to make transactions for the sake of transactions.
Do affiliates enable bonus abuse?
Affiliates play an important part in this ecosystem too, given their role connecting players and operators. A typical scenario would be an affiliate promising an operator that they can identify a certain number of new prospective players for their promotional campaigns.
This may sound like a win-win scenario (the affiliate gets paid and the operator gets new players), but all is not as it seems. The problem is that affiliates don’t care who signs up to these bonus campaigns, only that they are signed up. In many cases, there is no due diligence from affiliates to ensure that bonus promotions are used by legitimate players.
The jury is still out on the role of affiliates in today’s igaming industry, since they can and do serve a valuable purpose. Something needs to change, however, since some affiliate sites currently function as a notice board for fraudsters to browse the latest bonus deals and pick those to their liking.
By the time that an operator realises that the money they spent on their latest bonus campaign has resulted in zero new players, it is too late for them to do anything about it.
This is not OK, and affiliates need to recognise their role in enabling this behaviour and take serious steps to prevent it, paying more than just lip service to the problem.
Solving the problem
These are serious problems, but there are ways that the industry can go about achieving change. For instance, were e-wallets linked to a single app or device, the cost of scaling scams such as bonus abuse would become prohibitive and far less popular.
Likewise, if e-wallet providers were more transparent with operators and shared better/more data, which is still possible under GDPR, it would be much easier for operators and regulators to shine a light on fraudsters. The arrival of open banking and open APIs could also be a chance for the industry to change the status quo.
The operator/affiliate/e-wallet relationship cannot continue in its current form, that much is clear, and something has got to give. I believe that 2018 is the year that the industry decides enough is enough and it will be fascinating to observe how things change over the next 12 months. Watch this space.
Jens Bader has more than 20 years of experience in the payments industry, and recently co-founded MuchBetter, the new payments application for igaming
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