Björn Evers, Board Member, Jumio
Björn has worked as CEO in the gambling industry since 2004 and has an extensive network throughout the gambling industry. In this article, Bjorn addresses the problems surrounding secure payment methods and age verification faced by online gaming companies, and how Jumio is going some way to solve them.
Online gambling is a global industry that continues to experience rapid growth year on year. The security measures required for secure transactions are extensive and onerous on potential players, resulting in significant dropout rates as they go through the registration process as well as the cashier process. In accordance with standard KYC legislation, gambling operators must authenticate the identity of the player and the validity and ownership of the credit card being used. At the same time, gambling operators must always focus on improving the usability of the site, making it very easy for the gamblers to sign up and deposit funds into the account. The higher conversion you have, the more sign-ups and deposits you will have. The problem is that usually higher security means lower conversion. To maximize the bottom line you need to find the right balance of security.
Fraud prevention tools are designed to decrease identity theft and credit card abuse. Current fraud prevention tools include 3D Secure, verifying phone numbers and addresses, and requesting physical scans of government-issued IDs. Maintaining these tools is costly and taxing on customer patience and perseverance. For example, it has become standard practice to require potential customers to fax over scanned copies of their identifying credentials. Considering the declining relevance and use of fax machines, one can start to understand the detrimental impact of these KYC requirements on the conversion rate. 3D Secure was developed by the banks, but is not popular among online gambling operators as the lack of consumer usability leads to lower conversion rates, while still 3D Secure only offers a false sense of security.
What is more, the banks know 3D Secure is not really protected which leads to another problem. Since the issuing bank is liable for all 3D Secure transactions they sometimes decline 3D transactions if it is gambling-related because they are afraid it is a fraudulent transaction. However, merchants are still liable for fraud if they do not use this program, leaving them in a Catch-22 situation. So if you do implement an anti-fraud tool, you have to first make sure it really is secure and then measure the conversion rate.
As a merchant you always need to consider the trade off between security and conversion. Losing out on casual gamers who are scared away by these necessary security measures is a real problem and a threat to unlocking new growth opportunities. The reason we see all these security issues is the anonymity of the internet. Plastic cards were designed for the offline world and the gambling operator has no way of knowing if the card is present at the transaction and if the customer is the owner of the card. 3D Secure claims to know that the consumer is present at the transaction, but the credit card doesn’t have to be present; the credit card data is still typed in. A natural solution to online fraud would bring offline security to the online world. The question is how do we do this without sending out credit card readers to everyone?
The way forward is to tackle the fraud and conversion issue through a user-friendly payment method that increases conversion while providing operators with an innovative KYC platform in a more secure environment. For instance, with Jumio’s NetSwipe, fraudsters need more than the card data, they need the physical card. This solution brings offline card-present dynamics to online commerce. This has been developed by utilizing the camera or webcam of any computer or mobile to read the credit card with advanced OCR technology. For the customer purchasing goods and services online, this translates to time saved and a hassle-free transaction.
Age verification can also stand in the way, but working on a similar principle, a new program launched earlier this month – NetVerify – can check identification to make sure players are over the legal age. The solution leverages technology developed for Netswipe to verify photo IDs with a camera. To gain access to a gambling website, the customers prove their age and ID by swiping their driver's license or passport in front of their camera. The ID is then read and the name, date of birth and country is confirmed. The product was designed with KYC regulations in mind for the gambling industry and goes some way towards solving the difficulties in verifying customer identity and age.
As time progresses, this online ID checking will become increasingly more sophisticated and these new programs represent the first step in the right direction for easy online gaming.