Safer Sweepstakes Casino Payments with AI for Fraud Detection

According to Sumsub’s 2024 iGaming Fraud Report, fraudulent activity in the online gaming sector has increased a whopping 64% on average year over year. The most popular fraud schemes?

In addition to the all-time favorite bonus abuse, criminals also enjoy affiliate fraud, illegitimate chargebacks, money laundering, and account takeovers. That’s enough to bankrupt the industry.

Luckily, a new defense mechanism is emerging. Based on a recent survey, 94% of stakeholders from across the payment industry recognize AI as a measure to revolutionize fraud detection and improve payment security.

Here’s how online sweepstakes casinos can use AI to keep fraud in check.

Introduction to AI in Fraud Detection

Sweepstakes casinos are not new to AI. In many different shapes and forms, AI (Artificial Intelligence) is already helping them provide near-accurate sports betting predictions, personalize gaming experiences, encourage responsible gaming, improve customer service, and develop games.

As of late, a certain number of operators are being introduced to the idea of AI-run security systems set to detect and battle fraud. AI for payment security can ensure smooth transactions and aid casinos in dodging existing fraud schemes and learning to cope with new ones.

AI-based fraud detection technologies rely on complex algorithms to learn and recognize patterns that are invisible to the naked eye. In other words – through continuous learning and monitoring, AI can detect anomalies in payment transactions that a human fraud team can not.

Technologies Behind AI-Driven Fraud Detection

The iGaming industry has yet to learn about AI and its many applications. But however numerous, most AI-powered technologies for fraud detection have the same modus operandi.

AI must collect and analyze large amounts of transactional and behavioral data to learn the difference between fraudulent and regular behavior in a process called “model training.” After the initial training, the machine learning model keeps learning about fraud from regular updates.

In the meantime, the AI algorithm tracks all incoming transactions and monitors payment behavior for suspicious activity. It flags and quarantines potential fraud cases, simultaneously sending a red flag and a detailed report to the designated human security team for further analysis.

This basic principle provides a framework for a wide variety of AI solutions:

• Behavioral biometrics – Well-trained AI can detect fraud by analyzing payment-related user behavior and mannerisms, such as typing, swiping, and handling a device. 
• Transaction monitoring – Continuous monitoring helps spot potential fraud schemes by assessing incoming activity based on previously learned examples of fraud. 
• Pattern recognition – AI algorithms can tell “right” from “wrong” by comparing the input to an established pattern of normal activities created through machine learning. 
• Anomaly detection – Any input or activity that falls outside the definition of “normal” is registered as an anomaly and immediately reported as suspicious. 
• Natural language processing – AI can analyze the context, tone, and specific vocabulary players use when discussing payments with chatbots and virtual assistants. 
• Sentiment analysis – A combination of behavioral biometrics and natural language processing helps AI analyze the intention behind user feedback and interactions. 
• Biometric authentication – Payment authentication is one of the most obvious use cases for AI, which already thrives in fingerprint scanning and facial recognition.
• Holistic AI-based solutions that incorporate various fraud detection mechanisms are already in the works. So-called “autonomous prescriptive solutions” – fully automated anti-fraud systems that leverage AI – can reportedly recognize fraud schemes with a game-changing 84% accuracy.

Implementation of AI in Sweepstakes Casino Payments

Currently, some of the biggest threats to sweepstakes casinos include fraud-related schemes such as multiple account creation with synthetic IDs, chargebacks, and various types of “bonus abuse.” Fake referrals, “matched betting,” and “chimp dumping” are increasing by the minute.

So far, sweepstakes operators have tried to fend off fraudsters by implementing rule-based systems and manual review processes that are insufficient to match AI’s speed and accuracy.

The adoption of AI tech can help in multiple ways. Most importantly, AI can:

• Mark irregular activity or user behavior in real-time.
• Isolate potential threats before they cause damage.
• Minimize the number of fraudulent attempts at scale.

“AI not only enhances engagement by aligning offers with player performances, but it also acts as a vigilante protector and a safeguard against irregular activities and ensures a fair and secure environment for all players,” explains Artem Kolodyazhnyy, one of the leading field experts.

Benefits of AI for Fraud Detection

As expected, AI fraud detection can provide a host of benefits for all businesses in the iGaming sector that are losing money and player trust due to increasing criminal activity:

Fraud mitigation

Up to 15% of the iGaming industry’s gross revenue is lost to bonus abuse fraud, and the number of fake accounts has jumped 85% in only a year. Even more than regular casinos, sweepstakes operators are in a situation where the smallest win against fraudsters can save them from ruin.

Reduced costs

AI can help reduce costs in other ways, as well. In addition to fraud mitigation, sweepstakes casinos can count on technology to automate a large chunk of fraud detection (and other security-related) efforts, thus allowing human experts to focus on creative thinking and strategic growth.

Brand integrity

Fraud affects casinos as well as players, making them feel insecure or leave empty-handed. Criminal activity can alienate players and erode their trust, which could be even more damaging to the business than fraud itself. AI can help prevent this by creating a safe casino environment.

Scalability

As anti-fraud technology evolves, so does fraudulent activity. Criminals are always finding new ways to bypass our current defense mechanisms, so we need a scalable solution. Like humans, AI never stops learning; unlike us, it is capable of learning, improving, and defending in real-time.

Potential Challenges and Risks

Unfortunately, AI fraud detection is not without risks and challenges of its own: 

• Resources: AI may be cost-effective, but it requires significant investments in time and money. New technology must be integrated with current systems, and the existing staff must be trained to operate AI-led operations. Small casinos may not be able to afford this. 

• AI attacks: Cyber criminals can access AI technology and use it for attacks. Adversarial attacks, where fraudsters learn to manipulate AI, present another looming threat. 

• Data privacy: AI requires large amounts of data to be effectively trained. Since this includes player information and behavioral data, the potential for misuse is too large to be ignored. Casinos that use AI must have foolproof data privacy policies in place. 

• Compliance: Online casinos can’t operate without compliance. Given the data privacy and player protection concerns, AI tech may make this more challenging than usual. 

These are some common issues you may experience.

Impact on Payment Security and Player Trust

The impact of AI fraud detection technology on payment security and player trust is highly beneficial.

AI-powered solutions are scalable and able to fulfill the robust cybersecurity needs of growing casinos that go beyond preventing fraudulent activities and unauthorized access.

AI can significantly improve payment security for both sweepstakes casinos and their players. Furthermore, it can help operators establish a secure payment processing system and an environment where players will feel comfortable making transactions and sharing their personal information.