Sports and fantasy sports gambling operations are a big deal in the U.S., with consumers betting more than $990 million in January alone. The market has the potential to expand even further, too, as Puerto Rico is reportedly considering legalization.
Many betting operations are tempting targets for fraudsters and other bad actors, however – especially online operations that do not require face-to-face customer interaction. Money laundering, account takeovers and other illicit activities threaten to turn away legitimate consumers, as well as the government agencies that provide gaming licenses.
This means fantasy sports platforms must enact robust anti-money laundering (AML), KYC checks and other fraud monitoring services. At the same time, these providers cannot afford to implement security procedures that slow onboarding processes, as that could risk losing customers to competitors that offer the speed and ease they seek.
The secret to success for fantasy sports gaming platforms is to tackle most of their customer verification processes behind the scenes while requiring minimal user engagement, said Jennifer Aguiar, vice president of compliance and risk for DraftKings, during a recent interview with PYMNTS.
“We’re engaging [in identity verification] a lot more from a data perspective, rather than automatically requesting the customers to upload documentation, which puts them out more,” she said.
A Data-First Approach
Sports betting platforms need to ensure customers are who they claim to be and aren’t using stolen information, attempting to open multiple accounts, laundering money or trying to sign up while being underage. The verification steps necessary to accomplish this can present frictions for users who want to onboard quickly, however.
DraftKings tries to solve these onboarding hurdles by verifying as much customer information as possible before calling on consumers to supply documentation. The company can often verify users’ names, ages and the last four digits of their Social Security numbers before requiring them to provide additional details. It turns to a KYC aggregator to help verify customers’ data by pulling credentials from several different databases. Aguiar said it’s important to use multiple databases to cross-reference and confirm details in case one provider has outdated or inaccurate information. DraftKings asks customers to fill in any missing data pieces only when this analysis is complete.
“We’re not relying on one identity verification vendor to handle this,” she said. “We’ve created a waterfall effect where we use multiple vendors to make sure we have as much information as we can on the customer as we set them up.”
Aguiar said this verification process marks a major change for DraftKings. The company was using only one data supplier when she joined the team three years ago, and customers were asked to manually upload documents to fill in informational gaps.
“Especially [in the] sports betting and casino space, we’re leveraging companies that have historical data that we can use in building our models,” she said.
The current process not only creates less demanding customer experiences, but it also enables users to onboard faster – which, according to Aguiar, is critical during the high-traffic football season.
Though Aguiar said DraftKings is unlikely to face attempted account takeovers, it does sometimes encounter sign-up attempts from underage users, bad actors attempting to use others’ credentials or those interested in perpetrating money laundering schemes.
The firm uses various strategies to combat these activities. It sets up real-time alerts to flag suspicious actions, such as when users dump funds into their accounts and then remove them without placing wagers or entering contests. The company is also notified when account funds are untouched for long periods or if unusual account activity is noticed.
“If someone’s average bet is $10 for a long time, then all of a sudden they’re betting $10,000 – that’s something we would look at to ensure we’re doing due diligence to understand if there’s a problem or not,” Aguiar said.
DraftKings also monitors cases in which users’ behaviors appear legitimate but could indicate signs of addiction, and alerts help the company see whether users may be getting themselves into trouble.
Fantasy sports and gaming platforms can vigilantly monitor for and rapidly respond to signs of abuse and misuse by leveraging such alerts and AML and KYC practices. In doing so, they can ensure that customers can play in peace, worrying only about their odds.