Sports betting fraud attempts skyrocketed in the second quarter of 2021 as the COVID-19 pandemic peaked.
A new TransUnion report released Wednesday found gaming to be the most susceptible industry to fraud attempts. The US digital fraud attempt rate in gaming jumped 261.9% from the second quarter of 2020 to the second quarter of 2021. Travel and leisure was second with a 136.6% jump.
Dissecting those figures, sports betting fraud attempts jumped 114% in the same time frame, according to Melissa Gaddis, senior director of customer success at TransUnion. The report is based on “billions of transactions” from TruValidate, a system used for identity proofing, authentication and fraud analytics.
“[We’re] seeing increases in transaction volumes and people who perpetrate fraud go where the money is,” Gaddis told LSR.
US sports betting transactions are increasing rapidly. Sports betting revenue in the first half of 2021 was $1.8 billion, more than the 2020 total of $1.5 billion, according to an American Gaming Association report released Tuesday.
Global rise in fraud noted
Overall, fraud attempts increased 16.5% globally, according to the report. The general rise was in part because of transaction growth between the two quarters.
The second quarter of 2020 included the most significant shutdowns during the COVID-19 pandemic.
Globally, gaming was the most significant target for fraud attempts, rising 393%. Travel was second at 155.9%.
“It is quite common for fraudsters to shift their focus every few months from one industry to another,” Shai Cohen, TransUnion Global Fraud Solutions senior vice president, said in a release. “Fraudsters tend to seek out industries that may be seeing an immense growth in transactions.
“This quarter, as countries began to open up more from their COVID-19 lockdowns and travel and other leisure activities became more mainstream, fraudsters clearly made this industry a top target. The immense growth in gaming fraud also can be attributed to the shifts in focus of fraudsters as this growing market becomes a larger target.”
Types of fraud most likely in US sports betting
Gaddis said within sports betting, there were two main types of attempted fraud: hackers stealing money and users trying to game the system.
“Some of it is fraudsters who can get into accounts and withdraw money,” she said. “As the industry is looking to increase market share and entice people, they have offers. People are trying to take advantage of those offers.”
Gaddis said while many people might not consider the latter example a fraudster, it does cost a business revenue and is fraud.
More fraud risk in growing industry?
While the US sports betting and iGaming industry is growing quickly, Gaddis does not necessarily believe fraud will also increase;
“In the US, we have more restrictions and put the onus on states to ensure compliance from a regulatory standpoint,” she said. “I don’t know that [expansion] is going to increase the fraud percentage because gaming has been around a long time and people looking for free spins isn’t unusual.
“As we legalize it more in the US, businesses just need to be aware of the solutions to ensure their gamers are protected.”
Gaddis also said TransUnion encourages consumers to protect themselves, namely through the use of two-factor authentication.
Two-sided coin in sports betting
The rush to grab market share has companies handing out free promo bets liberally. Those are opportunities for fraudsters to capitalize on as they attempt to game the system, Gaddis said.
She also said those promos are loss-leader risks that US sportsbooks are willing to accept.
“Eventually, the businesses want to have someone on their site that spends money,” she said. “They want customers on their sites and provide them entertainment, but it needs a revenue stream. Some of our customers are more diligent about it and others just consider it the cost of the business.”