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Chargeback abuse at online casinos

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No matter how legitimate and above board the business is, there will always be a criminal element that looks to take advantage for their own benefit. From abusing online gambling bonus offers by creating more than one account, to making purchases at online casinos using a credit card and then claiming it wasn’t a permitted purchase, businesses take a knock when users are less than truthful.

Chargeback, also known as “friendly fraud”, hits e-commerce businesses in particular simply due to the global nature of transactions that take place over the internet.

Whether the cardholder claims that their card has been stolen or suggests that the purchase wasn’t permitted, users take possession of goods or services and, by charging back, don’t pay for them.

What is a chargeback?

The definition of a chargeback is when a credit card payment provider demands that a merchant reverses a purchase on behalf of their client due to a fraudulent or disputed transaction.

In an online casino environment, the user may create an account and make a purchase using a credit card. As long as the user has all the information necessary to load the credit card onto their casino account, they are able to purchase casino credits to play casino games using that card.

Should that user then tell their bank that the card was stolen or cloned, the bank makes contact with the online casino operator and advises them to reverse the transaction.

While the chargeback process has been put in place to protect consumers who genuinely lose cards or are victims of credit card cloning, the service has been corrupted and twisted into a form of fraud.

Chargeback as a method to defraud

In the Arkose Labs 2019, Q3 Fraud and Abuse report, the consultancy who, after looking at 1.2 billion transactions across multiple industries and fraud types, established the following:

Ecommerce has created a space for fraudsters to thrive - The rise of eCommerce has connected the world. Merchants can reach customers anywhere in the world and customers can order anything they want, no matter the time of day or night. The eCommerce channel has been wonderful for customers, merchants, and fraudsters alike. People wanting to commit fraud can be based almost anywhere, without being suspicious or having their fraudulent purchases/logins noticed.

Worldwide data breaches, access to credentials, and lack of security at eCommerce checkouts mean that developing economies have become a hotspot for this type of criminal activity.

The US, Russia, UK, Philippines, and Indonesia have become top targets for attacks and as origins for these attacks.

Fraud attacks are both bot and human-powered – Criminals evolve. The report walks us through an example that shows how, as much as measures to prevent fraudsters evolve, so do criminals. At first, simple bots were used to automate attacks on merchants and their businesses. Once fraud prevention was put into place to stop the simple attacks, merchants had a lower amount of fraud, but these fraud attacks became more sophisticated.

Advanced attackers train bots to mimic human behaviour and this makes them much harder to track and catch! Once trained bots are detected and stopped, merchants then had to deal with organized attacks by humans using a large workforce.

Organized human fraud attacks are harder to recognize - Bots are not humans. Most of the time it’s easier to recognise the pattern that bots have been programmed to complete. However, when human beings are behind the attacks, using normal human behaviour to make purchases or user accounts, it is harder for merchants to track and put a stop to.

In the US alone, there has been an increase in chargeback fraud of 47% over the last 4 years.

Given the adaptability of fraudsters and how much of a menace this type of crime affects businesses unless eCommerce merchants focus on fighting and protecting against chargebacks, they risk losing valuable resources and profits.

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