Few things make a sporting event more interesting than wagering a few bucks (or more) — whether it be a football game between two mediocre teams or a baseball playoff. That’s just a fact of life, known since the first cavemen competed to see who could lift the largest boulder (or something like that).
It’s also that fact of life that is shining a new spotlight on consumer authentication and identity (ID) security. Thanks to a U.S. Supreme Court decision earlier this year, states have the choice to legalize sports betting, including via online and mobile networks. Some states are rushing to embrace this new reality, as others are weighing their options — all the while being lobbied by sports leagues and other organizations for a cut of the $150 billion that the American Gaming Association said U.S. consumers wager on sports annually.
Digital ID Importance
Lost, perhaps, in all the commotion is the role that digital identity providers, such as Jumio, are sure to play in this evolving area of payments and commerce. In a new PYMNTS interview, Philipp Pointner, Jumio’s chief product officer, spoke with Karen Webster about how to best secure gambling transactions, and what it might take to put payment card networks on a quicker path to facilitating those payments.
First off, it pays (pun mostly intended — sorry) to note that none of this is wholly new. Big players have already offered sports betting — digital and otherwise — in Nevada, parts of Europe and other places. In addition, participants in the online wagering industry are bringing their authentication wisdom to the United States, or at least serving as unofficial guides for smaller firms, hoping to capture more of the business as legal sports gambling spreads in the U.S.
In general, Pointner told Webster, authentication and gambling services providers are “looking at new applications for things that are already there and already exist. I don’t think a lot needs to be reinvented, but just applied to new uses cases — which is really an old use case in a new country.”
Indeed, the lessons learned as retailers and payment providers work to reduce transactional friction, while beefing up consumer and data security, will generally work to the benefit of gambling services providers in the U.S. That’s not to say, however, that online and mobile sports wagering presents no unique challenges.
Gambling Challenges
For starters, there is the problem of location.
Not only must bettors be of legal gambling age, but they must place bets within jurisdictions that allow them — and which, given the federalist nature of this country, will have different rules than a neighboring state. Solving that problem requires, in large part, a focus on authentication during the consumer onboarding process, he explained.
“Physical location is going to play a big role,” Pointner said, adding that government ID documents will go a long way to clear individual consumers for legal bets.
One of the main goals of Jumio, and similar firms involved in gambling authentication, is to “prevent account sharing,” he said, as that can lead to fraud and other illegalities, including making it easy for minors to place bets. “Biometrics will be one way” to prevent that, though he added that a person who has the numeric code to unlock a phone can get into that device and create fraudulent accounts. Still, relying on biometrics — such as fingerprints — to access a device can help authenticate device possession and physical location, he said, and help prevent account takeovers and other criminal acts.
Furthermore, successful authentication and security in this new world of sports gambling requires that attention be paid to such issues as “who opens the accounts, the types of payment instruments they use, how the money flows and other behavior patterns,” Pointner said. That’s especially important in an area of payments and commerce that presents relatively high risk for money laundering and other illegalities.
Combining Tools
The trick? That would be “combining all of the tools everybody in the industry speaks about all the time and concentrating them into a strong solution,” he told Webster.
That said, the relatively high risk that gambling transactions will lead to chargebacks or fraud is a factor in the (temporary?) reluctance of credit card providers to open up their payment rails to those transactions — even with the OK of the U.S. Supreme Court. Will those credit card companies take a warmer approach to gambling once they see that authentication is working?
Webster posed that question to Pointner. However, to him, the question is not so much about strong consumer authentication, but simple revenue.
“Why would you say no to the money?” he responded. “At the end of the day, it’s business.” Those card companies already have a sophisticated understanding of risk, he added, and that means they are well-positioned to manage it. He added, “At the end of the day, it’s all about the chargeback rates.”
Expanded sports gambling in the United States is an obvious opportunity for a variety of players, and it’s hard to believe that the card providers will sit this out for too much longer. Each state will have its own method, though — and so much of the success of this endeavor will come down to authentication and security.
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