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Identity Authentication for Online Gambling

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Eric Haruki

How "Know-Your-Customer" (KYC) can be a Jackpot for the Online Gaming industry

As COVID19 ran rampant throughout our society and economy over the past two years, it also brought major tumult to the casino market. The pandemic simply wrecked the US gambling industry, with total revenues dropping 79% due to the shutdown of over 1,000 land-based casinos in March 2020, according to the American Gaming Association.

Year-over-Year land-based casino game revenue declines:

  • Table games: -86%
  • Slots: -82%
  • Sports Betting: -46%

For too many, the economic downturn had lasting negative outcomes. Some casinos shuttered for good, thousands of employees lost their jobs, and when a few land-based casinos tried to resume operations (in fits and spurts), they necessarily looked completely different from what players were previously used to.

As we’re all now aware, indoor venues were forced to operate under strict safety protocols that proved to be a downer to the previously festive gaming environment. And so although casinos were open for gaming, players were discouraged by this new reality and ultimately became hesitant to step in to play.

But in the wake of this crisis and business disaster, necessary adjustments came to light.


Migration to Online Casinos

While government regulations forced land-based casinos to severely modify or curtail their operations, some opened new or aggressively promoted their online gaming environments to survive, and even thrive. Gamers, stuck at home, migrated en masse to online casino games and mobile gambling.

The traditional casinos that were already established in the online gaming market saw revenues and player counts rise dramatically, while casinos without an online presence found themselves considerably behind the curve.

As an example, New Jersey’s online casinos saw considerable gains in iGaming revenue while physical Atlantic City casinos effectively collected dust. The former saw a 66% rise in March 2020 to $65 million in revenue, ultimately achieving $700 million in 2020, compared to $483 million a year prior in 2019. For its part, FanDuel (primarily associated with sports betting) reported gambling activity increases within its casino (online blackjack & roulette games) portal, to the tune of $240 million in bets.

But in truth, independent of the pandemic-introduced rocket fuel, the online and mobile gambling market was already primed to be a major player. Per Statista, the global online gambling industry was worth nearly $59 billion in 2019 and is predicted to rise to nearly $93 billion by 2023, quantifying the impact of a new generation of gamblers who have been flocking to online casinos via their desktop or mobile devices.


What drives online casino demand?

While the online / computer gaming experience will never replicate the legacy, visceral experience within a traditional casino, the core benefits presented by an online environment (beyond escaping the latest COVID variant) should continue to stoke growth in this sub-market.


Regardless of work schedule, personal obligations, or a lack of means (or desire) to commute to the nearest gaming house, one can spin a virtual roulette wheel from the comfort of their couch.

Game Selection

Land-based casinos are obviously bound by their physical parameters and thus can only offer a finite selection of games. As such, they cannot match the abundance of casino games presented online, as there are literally thousands of options from which to choose.

Bonuses & Promos

Well aware of what is required to compete against their brick & mortar counterparts, online gambling sites offer aggressive welcome and retention bonuses that exceed those offered by traditional casinos. The distinctive or expanded “digital perks” of free spins, ongoing reload offers, and reward multipliers are some of the benefits that keep online players logging on.


Best operating practices & necessary compliance measures

And so of course, wherever the action and money flows, fraudsters will always follow to “provide” reputational as well as existential business operations risks. Fraudsters too never stop innovating in their tactics and invariably exploit vulnerabilities in a casino’s online infrastructure. As such, it is essential for gaming providers to invest in measures to protect themselves, their customers, and stay in full compliance with government regulator imposed Know Your Customer (KYC) requirements.

United States based (as well as many other international jurisdictions) online gambling operators are required to develop and deploy anti-money laundering (AML) procedures, under risk of loss and severe penalties. KYC and AML compliance measures are intended to prevent online gaming providers from onboarding fraudsters and facilitating their criminal or even terrorist related activities.

For banks and financial institutions KYC processes help to prevent fraud, financial crimes, and money laundering. For online gambling entities, KYC is used during the onboarding process to verify customers’ identities, but it extends beyond these financial crimes. In this domain, KYC & ID authentication procedures also aim to filter out underage gamblers, stop multiple accounts fraud, and foil gambling addicts.

Specifically, there are three main drivers that spurred the development and enforcement of online casino KYC & ID Authentication processes:

1) Anti-Money Laundering

Money laundering activities fund the expansion of criminal entities and terrorist cells, and it is believed that 2-5% of the world’s GDP is actually laundered money, equating to between $800 billion and $2 trillion. In casinos, criminal groups “wash” funds by deliberately losing games (to their co-conspirator) and also in claiming “clean” winnings. In 2016 Cantor Gaming was fined $22.5 million for their poor AML provisions, which enabled individuals to launder large sums of money through their platform with bad bets.

Technology innovation and advancements can be a double edged sword, providing greater functions and convenience, but also facilitate more sophisticated criminal schemes. The introduction of virtual credit cards, prepaid mobile credit, and digital financial services vendors such as PayPal have all benefited everyday consumers, but they also enable micro-laundering activities that are far less detectable to authorities and regulators.

Given platform anonymity (vs. in person gambling), it is essential that online casinos identify high-risk patrons and their activities or they run the risk of becoming a vehicle for money laundering activities.


2) Fraud Prevention

With internet gambling, effectively anonymous users can deposit illicitly gained funds or fraudulently create (and compete against) fake players in “multiple account fraud” schemes.

As to the former, criminals can obtain and use stolen credit cards as payment methods to game using a victim’s funds. Similarly, fraudsters can submit fake documents and / or play under another person’s identity to avoid the repercussions from losses.

Online casinos frequently fall victim to multiple account fraud, where users create multiple fake accounts to throw games. A common scenario is when a user creates numerous fake accounts and enters them all into a table game such as poker. By controlling the actions of all players, the real user could have every fake account lose to ensure he has the winning hand.

Identity authentication is also crucial to combat the growing problem of underage online gambling. As an example, nearly half a million children between the ages of 11 and 16 are found to illegally and regularly gamble in the UK. These “tech natives” easily log onto a gaming site and use their parents’ IDs and credit cards to create and fund gambling accounts.


3) Regulation Non-Compliance & Resultant Fines

As an example of the penalties an operator can face when not complying to gaming regulations, the online gambling website, DraftKings, was fined in 2020 for allowing over 50 bettors to gamble despite these individuals being listed on self-exclusion lists. Within that group, 13 gamblers lost a total of $28,800 in DraftKings bets, which triggered the New Jersey Division of Gaming Enforcement to penalize the operator for its poor or non-existent identity checks.


ID Authentication Challenges for Online Casinos

Given exploding demand for online gambling services, virtual casinos are being saddled by more and more identity and KYC checks to ensure mitigation of security risks all while ensuring player satisfaction. Within this vibrant and competitive space, a slow onboarding experience may cause users to simply drop out of the application process and log on elsewhere. A careless one may expose your online platform to security risks and massive downstream regulatory fines.

Work with the leader in remote / online Identity Authentication.

With these challenges in mind, UVeritech developed our PALIDIN WebID to address the robust and ever evolving requirements of online casinos. Our remote authentication process aligns with the stringent requirements of this market to provide accurate and efficient identity authentication of their online patrons.

PALIDIN WebID employs the industry’s best image capture and processing, liveness recognition, and document authentication technology, enabling online casinos and gambling platforms to onboard and verify customers without transaction hassle, ensuring patron delight and repeated play.

Finally, our flexible and scalable pricing models mean that our online casino customers and their users enjoy near-instant identity verification capabilities with minimal upfront CAPEX outlay, all while keeping apace with ever-evolving compliance regulations.

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