Chargeback Fraud in Gaming: How Operators Can Defend Themselves

About the Concept

This is a forced return of funds initiated by the holder of a payment card. The procedure is processed via Visa or Mastercard.

If customers believe a transaction was executed improperly, they can contact their bank to request cancellation.

After this, a resolution of the dispute between the client’s financial institution, the seller’s one, and the payment provider begins. If the complaint is found to be justified, the money will be returned to the cardholder.

The first such procedures occurred in the 1970s, when international systems were actively developing debit and credit card settlement systems.

With the popularisation of e-commerce, the importance of a chargeback has grown significantly. Consumers began to make more online purchases, unable to personally verify the goods or services.

The right to challenge writing-off became an additional security assurance and strengthened the credibility of online transactions.

Over time, a return of funds became normal for almost all sectors, including the iGaming industry.

What Is Chargeback Fraud

Initially, repayment was a legal tool aimed at consumer protection. However, over time, it began to be actively used by criminals.

A separate type of financial scam has emerged: clients first gain access to the selected services and then try to return the money spent through the bank.

In the online casino niche, this scheme is as follows.

A registered customer:

• makes an initial deposit;
• launches games or places bets on a bookmaker platform;
• withdraws winnings;
• applies to the bank with a request to cancel unlawful write-offs.

This type of scams is often called “friendly fraud”. The chargeback is initiated by the legitimate cardholder, who is attempting to simultaneously keep the received gaming service and return previously made deposits.

Why This Is a Problem for the iGaming Sector

The industry is considered one of the most vulnerable to such an offence. This can be explained by the specific nature of digital services, the high speed of financial transactions, and the international character of the business.

Unlike traditional e-commerce, where it is possible to return products or cancel the order, in an online casino or on a betting site, it is almost impossible to change anything after the session is launched. This creates an excellent basis for manipulations.

There are several reasons why chargeback fraud poses a particular threat to operators.

Digital Format of Services

Immediately after making a deposit, players gain access to:

• user account;
• slot machines and live entertainment;
• bets;
• bonus offers, and other features.

If a customer has already placed bids or used bonuses, business owners cannot cancel or take back the service provided. Even if the bank subsequently satisfies the chargeback request, the casino project will have already incurred the associated costs.

Dynamic Gameplay

A few seconds elapse from the deposition of funds and placement of the first bet.

Users can play dozens of rounds, receive winnings, or fulfil the terms of a bonus program in a short period. This significantly reduces the time it takes for operators to spot suspicious activity and prevents potential financial losses.

High Payment Processing Speed

Modern online casinos and betting platforms try to speed up withdrawals. Fast transactions become a strong competitive advantage and directly affect customer satisfaction.

This is often used by scammers. After depositing funds, they try to cash out as quickly as possible, then contact the bank to request a refund of the initial bet via the chargeback process.

Global Nature of the Industry

Gamblers, operators, payment providers, as well as acquiring and issuing banks, may be located in different countries and operate within different legal systems.

Each party follows its own rules, requirements of financial services, and local legislation. This makes it more difficult to investigate disputed transfers and can take several weeks or even months.

Defence of Client Rights

The chargeback review process is often based on the protection of the cardholder’s interests.

While online casino owners collect evidence and prepare a response to the claim, funds may be temporarily debited from the person’s bank account.

If entrepreneurs cannot prove that the deposit was made voluntarily by the user, and services were provided in full, the dispute will be resolved in the customer’s favour.

Financial and Reputational Losses

Even one unjustified chargeback leads to additional costs. If such cases occur frequently, the consequences can be much more serious.

Operators lose not only the amount paid for access to the gameplay, but also:

• deduct fees for dispute processing;
• face deterioration of relations with banks and payment providers;
• risk exceeding the permissible refund level set by international financial systems.

Common Chargeback Fraud Schemes

Let us consider the most typical scenarios that exist in the entertainment niche.

False Statement about an Unauthorised Transaction

After refilling the account, users contact their bank and claim they did not make the payment, never gave their consent to the write-off, or are unaware of the money transfer.

Formally, such a claim appears to be an attempt to protect the cardholder against fraud. However, an internal investigation by the casino platform or bookmaker often shows a completely different picture.

The system identifies that immediately after the deposit, players performed the following actions:

• entered the website;
• used their familiar device and browser;
• continued the game session;
• placed bets;
• activated bonuses;
• interacted with the digital portal as normal.

Such data indicates that the deposit was made voluntarily, and the claim of an unauthorised transaction is an attempt to illegally recover funds already spent.

Negation of Participation in the Game

Most often, this happens after a series of unsuccessful bets or the complete loss of money paid to the digital resource. Clients contact the bank and claim that they never registered on the platform, played, or made any transactions.

The Use of Stolen Cards

This scheme is distinguished by the fact that the chargeback is initiated not by the fraudster, but by the actual cardholder.

Criminals can gain access to other people's financial data in various ways: through information leakage, phishing attacks, or by purchasing details on illegal sites. Offenders then register an account, make a deposit with someone else's card, and try to spend the funds as quickly as possible.

Generally, scammers try to:

• place the minimum required number of bids;
• fulfill the terms of bonus programs;
• withdraw funds to controlled payment instruments;
• transfer money through multiple channels.

When legitimate cardholders discover the charge, they contact their bank to request compensation. The chargeback procedure is initiated immediately after the request is reviewed.

Organised Fraudulent Schemes

In this case, all actions are planned and carried out simultaneously on dozens or even hundreds of accounts.

A group of attackers:

• creates new profiles en masse;
• uses different devices, IP addresses, and financial instruments;
• undergoes or bypasses verification procedures;
• receives welcome bonuses;
• quickly meet wagering requirements;
• withdraws available funds;
• initiates various requests through different banks almost at the same time.

Such attacks can become widespread and target several operators.

How Business Owners Protect Themselves from Chargeback Fraud

Modern criminal schemes affect numerous stages of gamblers’ interaction with the platform, from account creation to bonus receipt and prize withdrawals.

Most online casinos use multi-level risk control systems. They combine authentication technologies, behavioural analysis, financial monitoring, and AI tools.

Let us take a closer look at the main protection mechanisms.

Device Fingerprinting

This solution is used to identify a player's device based on its technical characteristics.

Every time a person logs into their account, makes a deposit, or decides to cash out prizes, the program creates a digital footprint of the gadget and compares it with previously stored information.

During the verification, the services analyse whether:

• the device has been used before;
• it is linked to multiple profiles;
• it has been involved in fraudulent schemes;
• the gadget matches the bettor's usual profile;
• any attempts have been made to conceal the product’s characteristics.

If the program detects that the same device is used by dozens of accounts or is already linked to previously blocked gamblers, the risk profile of the transaction will automatically increase. This allows operators to detect fraudulent activity even before the scammer initiates a chargeback.

KYC (Know Your Customer)

This procedure ensures that the profile’s owner is the same person who has access to the bank card and receives payments.

During verification, the casino site may request:

• a passport or ID;
• proof of address;
• a selfie with the document;
• confirmation of the ownership of a bank card or e-wallet;
• additional data in case of any suspicions.

Such checks reduce the likelihood of someone else's money being used. Furthermore, they create a solid evidence base in the event of a chargeback dispute with the financial institution.

AML Monitoring

Anti-Money Laundering systems assess:

• the origin of funds;
• the frequency of account replenishments;
• the size of deposits and withdrawals;
• unusual financial patterns;
• links between several profiles;
• suspicious chains of transfers.

For example, if a client deposits a large amount, makes almost no bets, and immediately attempts to withdraw funds to another payment instrument, this transaction may be automatically suspended. The system will temporarily block the money and redirect the request for additional verification.

Behavioural Analytics

Modern anti-fraud systems monitor not only financial transfers but also the gambler’s actions within the platform.

Algorithms study:

• the duration of sessions;
• the sequence of steps after a deposit;
• the speed of meeting wagering requirements;
• the size and frequency of bets;
• usual hours of activity;
• the history of previous rounds.

Most players are distinguished by a natural gaming activity. They launch different slots, adjust bid sizes, and spend a set amount of time on the entertainment portal.

However, if a visitor is trying to meet the bonus terms and withdraw funds as quickly as possible, the system may consider this scenario suspicious.

Fraud Scoring and Protection Platforms

These specialised services combine data from multiple sources, thanks to which their predictions are as accurate as possible.

During the analysis, the following aspects are taken into account:

• device fingerprinting;
• payment history;
• KYC and AML monitoring results;
• IP addresses and geolocation;
• the list of previous chargeback requests;
• payment instrument details;
• information about linked accounts.

Based on such data, the system calculates a fraud score — a comprehensive assessment of the possibility of fraud.

If the risk level is low, the transaction is performed automatically. If the indicator exceeds the established threshold, the program may request additional verification, temporarily suspend the payment, or submit an application for manual review.

The Collection of Evidence

Almost every user action is recorded in special logs. They include the history of entries in the account, device fingerprints, IP addresses, betting history, records of cashing out bonuses, and other information.

If clients initiate an unjustified chargeback, operators can provide these materials to the bank or payment system. This way, they can confirm that the deposit was made voluntarily and that the entertainment services have indeed been rendered.

Artificial Intelligence and Machine Learning

Unlike traditional solutions that operate according to preset rules, AI can independently analyse large volumes of data and identify patterns that are difficult for humans to detect.

Modern ML models help to perform the following tasks:

• predict the likelihood of a future chargeback even before a deposit is processed;
• identify new fraudulent schemes without manually adjusting rules;
• find hidden associations between devices, accounts, and payment instruments;
• automatically adjust risk models when new types of fraud emerge;
• reduce the number of false positives against legitimate customers.

As AI develops, such systems become more accurate. Thanks to them, entrepreneurs can prevent a significant portion of illegal transactions before scammers have a chance to withdraw prizes or initiate a refund procedure.

The Main Things about Chargeback Fraud in Gambling

Key aspects that operators should take into account:

• Entrepreneurs face this type of violation due to the digital nature of services, the high speed of transactions, and the international format of the niche. As a result, business owners suffer financial and reputational losses and become involved in organised crime.
• To protect platforms against such crime, a set of tools is used. It includes device fingerprinting, KYC and AML monitoring, behavioural analytics, fraud scoring programs, as well as AI and ML tools.

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