Chargeback Fraud in iGaming: Features and Protection Methods

Return Payments in Gambling

A chargeback means an involuntary refund to users through a bank or special system. This mechanism was originally created as a tool to protect customers from fraud, the seller’s errors, and unauthorised charges.

In the standard model, the process is as follows:

• gamblers make a deposit;
• the bank or payment service processes the transaction;
• if clients consider the operation disputed, they can contact the financial organisation with a refund request;
• the bank initiates the transfer, after which it temporarily or completely debits the money on the part of a merchant.

In most industries, chargebacks protect consumers. They are used to address credit card theft, double debits, payment errors, and other issues common in the e-commerce sector. However, in the iGaming industry, the situation is slightly different.

Online casinos are considered a risky business, in part due to a high volume of transactions and the emotional behaviour of the audience. Therefore, return payments became not only a means of protection but also a tool misused by players.

About the Chargeback Fraud

Let us say a client registers on a gaming site, makes a deposit, withdraws winnings, and then contacts the bank to demand a refund.

At the time of making a request, clients may:

• deny the transaction;
• claim that the card was used without permission (for example, stolen);
• say that the account was hacked;
• refer to a “strange charge”;
• dispute the payment after losing funds.

In some cases, this mechanism is activated after the players have fully used the deposit, received bonuses, and launched other content on the casino platform for several days.

Why Gambling Is Vulnerable to Chargeback Fraud

The entertainment niche is traditionally considered one of the riskiest ones. The high speed of money transfers, the international nature of the business, and the specific behaviour of its audience create a favourable ground for various illegal schemes, including chargeback fraud.

Entrepreneurs face unauthorised refunds, which lead to direct financial losses.

Furthermore, when there are too many of them, it can affect:

• relationships with PSP partners and banks;
• cost of processing services;
• the level of fees;
• stability of the payment infrastructure;
• ability to scale the business.

iGaming as a High-Risk Vertical

Due to the increased speed and large volume of transactions, banks view online casino projects as an unstable segment. Platforms are subject to enhanced control measures and strict requirements from financial partners.

For operators, tightening of the risk policy leads to:

• increased commission fees;
• processing limits;
• continuous chargeback rate monitoring.

If the number of refunds exceeds the established limit, merchant account functionality may be restricted. In some cases, payment providers may even stop collaborating with casino owners.

Bets in the Incognito Mode

Many fraudulent schemes rely on the use of various ways to conceal identity and bypass restrictions. Fake data, VPN and proxy services, multiple profiles, bonus abuse, and other cloaking methods are considered the most common.

The greatest risks arise for iGaming platforms with underdeveloped anti-fraud systems, where the following aspects are not taken into account sufficiently:

• KYC checks;
• user behaviour analysis;
• real-time risk scoring mechanisms.

Highly Emotional Gamblers

After losing funds, some people:

• begin to dispute payments;
• claim “accidental” deposits;
• say that they did not understand the consequences of their bets;
• accuse the platform of incorrect functioning.

Such situations most often arise in crash products, live casinos, and the mobile betting segment.

Main Types of Scams on Gaming Sites

Let us consider the kinds of offences entrepreneurs encounter quite often.

Friendly Fraud

This is when customers make a deposit, play a game, use the digital portal's services, and later initiate a refund.

People may claim that:

• the payment was made without their consent;
• another family member used the bank card;
• the service was provided incorrectly;
• the account was “hacked”.

Friendly fraud often occurs after an unsuccessful bet, a denial of a bonus or withdrawal, or during a conflict with the support team.

Stolen Cards

This is the use of stolen plastic or compromised payment data for betting, bonus hunting, money laundering, and cashing winnings. When legitimate cardholders discover a debit, they contact the bank, which initiates a chargeback.

This type of fraud is especially dangerous for casino operators because:

• the owner of a card almost always wins the dispute;
• the platform suffers direct financial losses;
• the overall chargeback rate increases;
• relationships with PSPs and financial organisations deteriorate.

The Theft of Rewards and Refund

A separate category consists of schemes that combine bonus abuse and subsequent chargeback.

Users make a deposit on a gaming site and then:

• receive a welcome bonus or special offer;
• apply relevant mechanics;
• make wagers;
• withdraw part of the winnings;
• initiate a refund of the initial deposit.

The main problem is that online casino owners are charged twice. They lose money due to such fraud and also incur marketing expenses.

How Operators Fight Scammers

Effective protection of gambling platforms revolves around several areas. These are KYC, behavioural analysis, transaction monitoring, real-time scoring, and the use of AI.

KYC and User Verification

A high-quality Know Your Customer system remains a basic element of an anti-fraud policy. It allows for quick ID check, thereby reducing the risk of data theft or chargeback.

During the initial authentication, entertainment portals request:

• identification documents;
• residential address;
• confirmation of the payment source;
• reference of the cardholder’s name to his account.

Verification of gamblers is closely connected with the introduction of innovations: biometrics, automatic document check, and face-matching technology. These measures help prevent the registration of fake profiles and reduce bonus hunting.

Device Fingerprinting and Behavioural Analysis

These are 2 complementary approaches used to identify players, prevent chargeback, and study data. They make it possible to recognise personal gadgets or people’s actions, even if they hide their IP address or delete cookies.

The system evaluates:

• the device used to log in;
• how often the computer address changes;
• how typical the user behaviour is;
• how quickly actions are performed;
• whether there are signs of automation.

This analysis helps detect multi-accounting, suspicious financial activity, the use of VPNs and proxy services, as well as other atypical patterns. For example, the system may note a large number of profiles created from a single device, a sudden change in GEO, or excessively high speed of registration and making deposits.

Velocity Checks and Limits

To prevent chargeback fraud, providers are increasingly implementing manually configured restrictions on the pace and frequency of financial transactions.

Digital platforms can monitor:

• number of deposits for a certain period;
• frequency of payment attempts;
• use of different bank cards;
• withdrawal speed;
• transaction volume, and other parameters.

For example, entrepreneurs have the right to limit the number of unsuccessful money transfers or temporarily block them. Suspicious accounts are then sent for further testing, and their risk score is increased.

3D Secure and Payment Protection

Scanning operations via 3D Secure helps business owners make sure that the settlements are indeed initiated by the cardholder. This reduces the possibility of scams.

The use of such a tool assists in:

• reducing the number of unauthorised charges;
• make the return of funds less likely;
• decrease the number of claims;
• enhance trust between payment providers and banks.

In many regulated markets, the application of this mechanism has become mandatory.

Monitoring for Anomalies

Modern iGaming platforms actively use real-time control systems. They allow entrepreneurs to instantly analyse the actions of players and identify potential risks.

Real-time monitoring supervises:

• suspicious deposits;
• unusual changes in customer behaviour;
• changes of devices or digital fingerprints;
• abnormal gaming activity;
• non-standard financial transactions.

The main advantage of real-time monitoring is that casino platforms instantly respond to potential threats. The system blocks suspicious accounts before they lead to monetary losses or chargeback issues.

The Role of Artificial Intelligence

AI analytics demonstrates high effectiveness in live solutions, fast-bet products, crash games, and other projects with a high transaction load.

The system analyses the history of deposits, user actions during sessions, interaction with bonuses, speed of operation, and many other parameters.

Based on this data, a behavioural model is formed, after which the algorithms automatically assess the potential level of risks for a specific account.

Organisational Methods

Effective protection against chargeback fraud requires not only technologies but also constant monitoring by entrepreneurs. Therefore, gambling companies are increasingly creating separate teams and compliance departments responsible for combating scams.

The main duties of these specialists include:

• verification of suspicious transactions;
• disputed payment processing;
• interaction with PSP agents and banks;
• chargeback levels monitoring;
• customisation and improvement of anti-fraud procedures.

It is important for online casino owners not only to prevent fraud but also:

• promptly analyse controversial cases;
• keep transparent records;
• maintain communication with payment partners.

The Main Things about Combating Chargeback

Machinations with the refund are a common type of financial fraud on entertainment platforms.

Key aspects that operators should take into account:

• In the classic scheme, players first make a deposit on a gaming site and actively place bets, but then initiate a return of payments. This situation occurs due to a big loss, a conflict with customer support, or a refusal to grant VIP incentives or provide the withdrawal of prizes.
• Chargeback fraud can happen not only because of the actions of clients but also as a result of scams. This includes the theft of bank card data, multi-accounting, bonus hunting, and other violations that make the PSP provider block the funds previously earned by operators.
• To fight the return of payments, KYC and user verification, velocity checks, 3D Secure, and other mechanisms are applied. The implementation of AI algorithms and the proper organisation of the entrepreneur’s internal team give excellent results.