In iGaming, every business has to face three main challenges: fraud, chargebacks, and compliance violations.

Fraudsters are always looking for loopholes to steal money, chargebacks can eat into your profits and lead to heavy fines, and breaking the law can result in huge penalties or even the loss of your license.

All these payment risks can drain operators’ finances and even push them into complete bankruptcy.

MGL isn’t here to scare you, but to give you the knowledge you need. In this article, we’ll explain how to manage payment risks effectively and how to find the right payment provider to move forward with confidence.

Understanding Payment Risk in iGaming

In online gambling, you might face payment risks related to payment processing. Those risks have many reasons, but they are obvious consequences of an industry where a lot of money moves around quickly and anonymously.

As you know, iGaming is a high-risk sector where a high volume of transactions proceeds daily. There’s also multijurisdictional activity, as online casinos work with users from all over the world, and each jurisdiction has its own payment, gambling and taxation regulations. 

At the same time, the majority of users are anonymous, which is totally different from traditional banking. This makes their personal identification more complicated and increases the risk of money laundering and fraud. 

The specification of the online gambling industry faces a few types of payment risks:

Payment Fraud

This is the most frequent type of payment risk. Payment fraud involves using stolen bank cards, fishing, and other fraud schemes that some people use to deposit when they gambling.

Identity Spoofing

This is the primary reason why regulators want you to verify your players identity. They want to know everything about the user not to find them on Facebook, they want to prevent identity spoofing. 

Scammers use personal information of other people with clean criminal records to register, deposit and withdrawals. They use stolen bank cards that match the fake account’s details to bypass basic security checks. 

This is the problem for the victim and the business through chargebacks and fees. Identity spoofing also damages the company’s reputation. But it’s tricky to detect spoofing because the data appears legitimate. 

Chargebacks

Chargebacks sound like an obvious thing that usually happens. It’s not surprising that a user can dispute a transaction, asking their bank to cancel it. But it’s also a so-called “friendly fraud.” 

Sometimes this is a case of a user being unhappy with the outcome, and other times it’s a valid claim that the platform needs to review. Either way, operators get hit with significant fees from the payment processor, which can add up quickly.

Chargebacks are a big deal for platforms. Frequent chargebacks can result in heavy fines, and may even cause operators to lose the ability to accept payments, because the payment processor might see them as high-risk. 

Failed Transactions

Tech problems happen, and they can result in a very unpleasant experience when a payment is debited from a user’s account but not credited to their player account, or vice versa. 

You can be sure it will send a user’s dissatisfaction from 0 to 100 in just a second. And while you will need to spend time and resources to resolve the problem, you will also have to reply to a flood of emails from that poor user. 

Regulatory non-compliance

As already mentioned, there are so many jurisdictions where users gamble from. The way these regions regulate the industry differs a lot. Some places are more tolerant, others can be the strictest in the world. 

This is a big deal for all operators, but especially for offshore ones. They must meet all regulatory requirements, like implementing anti-money laundering (AML) and Know Your Customer (KYC) procedures. 

Otherwise, the “frustrated” regulator will fine the operator like there is no tomorrow, block their bank account, and even revoke the license. 

Primary Sources of Payment-Related Risk

This doesn’t mean that players are the primary source of payment-related risks. The problem lies elsewhere.

Four types of payment risks sources include:

Geographic risk

Some jurisdictions are recognized as high-risk because of weak AML legislation in, political instability, high level of fraud or even being a part of black lists of international organisations. When you target players from these regions, you have to be ready to face payment risks. 

Plus, when you operate in several markets, you face the impossible mission of meeting different legislation requirements in each jurisdiction. If you fail, you might be fined, the regulator can start to take action against you, or even revoke your license. 

That’s why we always recommend conducting the complete research before starting licensing and operating processes. We prefer to explore the business from A to Z at the idea stage to find the most suitable jurisdictions so you won’t ever face this payment risk source. 

User behavior

The way many players gamble leaves a lot of questions unanswered. Users create many accounts to get a lot of welcome bonuses. Multiaccounting is a big problem for the platform, which loses money and sees its marketing campaigns ineffective. 

As stated above, scammers also use personal information of a person with a clean criminal record to create a new account or to do account takeover to withdraw money. Again, the operator loses their income. 

Payment methods

Payment risks often originate from payment systems themselves. Bank cards are risky because of chargebacks, crypto currencies are a problem because of user anonymity. Even e-wallets aren’t completely safe; scammers use them for money laundering because of simplified user verification.

Third-party vulnerabilities

Having an unreliable partner is a sure way to face payment risks. For example, if a payment service provider has weak security, it makes your platform vulnerable to scammers. Another problem is that you can face many chargebacks related to the PSP you work with. 

Affiliate partners can use scams, illegal advertising, or target the wrong audience— even by accident. All of these things can directly damage your reputation and lead to legal issues with regulators. 

Fraud Detection and Prevention Tools for iGaming

Because of the high-risk nature of the online gambling industry, operators have learned ways of protecting themselves. They use several technologies that help to defend against an enemy’s attack. Here they are some of the key technologies they use:

Behavioral analytics

This is a powerful tool that focuses on the way how a user interacts with the platform. When we say “powerful”, we mean it's truly sensitive to a very tiny change in a user's behaviour. 

The system sees everything. For example, if a user who used to type slowly and carefully suddenly starts entering data at a very high speed. For the system, this could be a red flag for a hacked account or bot activity. 

But the biggest advantage of behavioral analytics is that it’s invisible for the user. It works in the background, not requiring additional verification or anything else from users. 

Device fingerprinting

Device fingerprinting is not the same as the fingerprinting you undergo when getting a visa or an ID in some countries. It involves creating a unique identifier for every device based on thousands of its characteristics. 

Things like the type of browser, operating system, hardware configuration, time zone, installed fonts, and battery level—all of these form a “fingerprint”. 

Operators use device fingerprinting to uniquely identify each device, even if users are using the same IP address or if a user tries to hide their identity by using private mood or clearing their cookies.

AI/ML-based risk scoring

It’s not surprising that AI and ML can process a huge volume of data, creating dynamic risk profiles and detecting anomalies that are impossible to find with traditional static rule-based systems. 

AI-based fraud detection software can analyze behavioral patterns, session duration, game types, and transaction history to distinguish legitimate players from bots.

On the flip side, the dangers of AI are growing much faster than traditional safety methods can keep up. But AI and machine learning algorithms are constantly learning from new data, adapting to fast-changing scammers’ tactics. Yes, we use AI to fight AI, but it’s the only way to effectively protect platforms from scammers. 

IP and geolocation tracking

By the way, IP and geolocation tracking isn’t a recommendation; it’s a must-have for every operator. This is a mandatory requirement to verify that users are gambling from the jurisdiction, where it’s actually allowed. 

If a Curacao-licensed operator targets players in the Netherlands, regulatory anger will grow exponentially. Trust us, the storm they will face will be unlike anything they have ever seen. 

Besides all rules and legislations, IP and geolocation tracking is an effective tool to deter people who are trying to hide using VPN, proxy servers, and GPS spoofing. 

It’s possible to change an IP address, but if you use these technologies alongside device fingerprinting, for example, it helps to detect a scam before it becomes a big problem for the entire system. 

The best way to prevent fraud and payment risks is to combine automation and manual analysis, not choose between them. A more advanced system can be bypassed by a more sophisticated one. But by implementing multiple layers of security, the problem becomes noticeable at the very beginning. 

These solutions are widely used not only in iGaming but also in ecommerce fraud prevention, since both industries face similar risks. 

Managing Chargebacks and Transaction Disputes

Imagine you have implemented all the strongest security measures, but you are still getting chargebacks from players. It’s impossible to stop them, because it’s an obvious risk with anything involving payment. As it’s the most common “friendly” type of fraud, let’s look at it more closely. 

A player might make a valid purchase and then dispute it to get their money back, or a family member could use the card without the owner’s knowledge. When this happens, the bank almost always sides with the player, forcing the operator to refund the money. Plus, the bank will impose a penalty on the “negligent” operator.

When an operator has an unclear refund policy or confusing terms, chargebacks are almost guaranteed. This isn’t necessarily a matter of fraud; users will simply dispute transactions because of a lack of understanding.

There is no way to forever forget about chargebacks. But you can decrease the number of them. 

Firstly, draft a clear and easily understandable refund policy. It will help you to stop disputing transactions that people made by mistake. 

Secondly, use 3D Secure and multi-factor authentication that requires a user to pass an additional verification before the transaction is made. For example, they will enter a code from an SMS. If something happens, it’s not your responsibility; it’s a bank’s problem. 

Ensure that your company’s name, which appears on a customer’s statement, is clear and recognizable. Unrecognizable or random-looking names often cause panic, leading customers to believe their card has been stolen.

But if a chargeback has already been made, gather all possible evidence: game history, IP addresses, session logs, and customer correspondence. The more effective representation you provide, the lower your overall chargeback rate. 

Ensuring Compliance with Payment Regulations

You may not have heard of “payment compliance” before. It’s basically a broader system for managing risks. Following these rules helps reduce the chances of fraud, financial crimes, and data loss.

Most of the time, it’s about the following rules:

• KYC/AML: KYC, or Know Your Customer, is the process of verifying a client’s identity. The main goal is to make sure the person is really who they claim to be, which means collecting and checking their documents. Anti-money laundering (AML) is a set of measures that include monitoring transactions, spotting suspicious activity, and reporting it to regulators.
• Payment data security (PCI DSS): This is a security standard designed to protect payment card data. It includes 12 requirements, such as encrypting data, regularly testing systems, and limiting access to information. PCI DSS compliance is mandatory for any organization that stores, processes, or transmits payment card data.
• Local Licensing Rules: These are standard requirements set by regulators for licensed companies. Operators must follow them to get a license and operate legally in the country. In this case, the license serves as proof that the company meets all local laws and standards.

All these measures aren’t just about the payment system; they also serve as an effective way to manage risks.

For example, strict KYC/AML procedures reduce the risk of dealing with dishonest clients, while following PCI DSS lowers the risk of data leaks. Not following compliance rules is a risk in itself, since it can lead to serious consequences.

How to Choose Risk-Resistant Payment Service Providers (PSPs)

Since online gambling is a high-risk area, even small mistakes can be costly. That’s why, when choosing a PSP, you need a reliable one that can support your growth and protect you from risks.

“Green flags” in a payment provider include support for high-risk businesses, fraud prevention tools like 3D Secure, real-time transaction monitoring, multi-currency support, and the ability to handle crypto. As we’ve already noted, online gambling operators especially need tools to reduce chargebacks.

In contrast, there are “red flags” like poor support, high decline rates, and limited jurisdictions.

Even if you’re a perfect match with a PSP, you shouldn’t relax yet. It’s important that the PSP not only has all the “green flags” but also integration options that actually work for your business.

This includes three common types:

• API: This approach gives you full control over the payment process and the user interface. This type of integration is best for companies that have their own IT team to handle development.
• Hosted Payment Page: The customer is redirected to a separate PSP page to make the payment. This takes the responsibility for storing card data off your hands but gives you fewer options for customization.
• Embedded Fields: This option lets you place card data entry fields directly on your website.

Online gambling is a high-tech industry, but there’s still no “Tinder” where operators can easily find a PSP that’s the right fit for them.

Good news: you don’t have to search on your own. MGL already works with reliable PSPs that support high-risk businesses, multi-currency systems, and fraud prevention. Contact us to get connected with the best PSP you can ever find in the industry. 

Bottom Line

Long-term business growth is more than just a strong platform and even a license. It’s also about proactive payment risk management. 

Fraud, frequent chargebacks, and non-compliance aren’t just inconveniences; they’re direct threats to your business’ financial stability and reputation. To avoid these pitfalls, you need to stay one step ahead.

That’s why it’s better not to wait until problems appear. Audit your current payment systems and make sure they meet the highest standards. Work only with experienced providers who can handle challenges and use advanced technology to protect against risks.

At MGL, we’re always ready to help you choose the right partner so you can focus on what really matters, growing your business and creating a better gaming experience for your customers.