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Gaming Merchants Are Riding a Rollercoaster in 2020 with Rises in Revenue and Fraud

Over the last few months, this has resulted in a massive increase in transaction volume and revenue for merchants in the gaming sector:

  • ACI saw increases in gaming sector transaction volumes of 109 percent in August, 52 percent in July, 70 percent in June, 84 percent in May, 126 percent in April and 97 percent in March, compared to the respective months in 2019.

What lies beneath…

The surge in transaction volumes has also come with a surge in fraud, as criminals look to hide their activity in higher order volumes, particularly for popular products that can be accessed instantly.
Millions of new customers purchasing gaming consoles also means millions of new accounts being created. ACI data indicates that some gaming merchants are seeing 1-1.5 million new accounts transacting per month, compared to the same period last year. These new accounts will be transacting for high-demand goods, with low time on file and minimal (if any) purchasing history. The challenge for gaming merchants is that it gives them little information on which to base their fraud decisioning.

In the digital goods world, a fast, seamless payments experience for new users is vital – it’s essential to keep acceptance rates high and false positives low. But immediacy and convenience are equally attractive to fraudsters, who will typically attempt to run internet bots or software applications to purchase as many of these high-demand goods as possible and drain inventory. They may also use tactics such as account takeover fraud to take control of existing (often dormant) customer accounts, shielding the fraud and getting past any screening process.

There is no time for a digital goods merchant to review and validate a transaction before the product is delivered to the consumer. Steep spikes in order volumes combined with the need for instant fulfillment necessitates a robust pass-fail fraud screening strategy that is tailored to up-to-the-minute customer behaviors and trends. So, how should gaming merchants approach this challenge?

Tackling the tidal wave

To develop a strategy that effectively balances fraud prevention and customer experience, gaming and other digital goods merchants need to look beyond their own customer history for insights. Access to a rich consortium database can help merchants determine if customers that are new to them have a positive transaction history in the overall ecosystem.

According to ACI’s internal benchmarking, 40 percent of accounts with a new time on file value of 50 days or less for a specific merchant also show over 200 days of history within the wider consortium database. By seeing the bigger picture, merchants can identify more orders that can be deemed non-fraudulent with low chargeback risk.

But a single tool is never enough to stop fraud. Data needs to be analyzed and used in conjunction with an array of other processes and technologies to determine if an order is genuine. Velocity rules can help with spotting repeat or mass attacks, alerts on previously dormant accounts can help identify account takeover and machine learning can help restrict bot activity. Meanwhile, positive profiling (along with whitelisting) can help identify genuine customers, thereby supporting a superior experience that keeps them coming back for more.

Fraud and chargebacks are inevitable in the virtual world, but a multi-layered fraud solution can help merchants achieve a resilient balance of genuine transactions versus fraud – and make the most of the current uplift in sales.

Building a strategy that provides a fast, seamless experience for new and existing customers, while stopping fraudsters, will pay off immediately. And, as the world transitions to a new normal, merchants with a high performing strategy will see higher revenues and lasting loyalty among customers who have become fans of their products, brands and service experience.

Risk Analyst

Sharell is part of the global ACI risk analyst team and supports a diverse body of merchants across multiple sectors. In this role, Sharell works closely with customers to develop and manage their fraud strategies, carry out statistical analysis and deploy multiple tools and tactics to prevent fraud exposure. Beyond work, he enjoys CrossFit, video games, hiking and exploring new places to eat.