Growing Online Gaming Industry
The gaming industry has seen substantial growth in the past decade, with the total number of gamers expected to reach close to 3 billion by the end of 20221, resulting in expected revenue to be north of $200B2. The number of available games has also increased substantially, with over 30k available on Steam, an online gaming marketplace.
In recent years, partly due to the pandemic, there has been a significant migration to online gaming; nearly half of all gamers are now online. Gaming platforms have capitalized on this by expanding their in-app purchase offerings. As a result, in-app purchases have also soared, with roughly 40% of US gamers making in-app purchases3.
This growth isn’t expected to slow down. Forecasts are estimating a CAGR of 12% through 20284, with the revenue in 2026 expected to reach close to $300B5—making gaming one of the fastest-growing and largest segments in the entertainment industry.
The increase in gamers and in-app purchases has greatly benefited gaming platforms from a revenue perspective, but it has also created more risks for the community. The ease of registration due to limited or no Know Your Customer (KYC) screening and the amount of dollars stored and passed around through in-app purchases has made gaming platforms a venue for criminal activity.
A Surge in Criminal Activity
The gaming industry, particularly online multiplayer games, has seen an increase in illegal activity in recent years and hit an all-time high during the pandemic, with fraudulent activity increasing an estimated 30% in 20206. Recently reformed regulations have made it increasingly difficult for bad actors to commit criminal activities through historically common channels. However, online gaming has emerged as a new channel of choice due to its:
- Unregulated status, both locally and internationally
- Limited and often non-existent KYC regulations
- Ease of acquiring and transferring in-game currency
- Populated platforms that are difficult to monitor activity
Money laundering and account takeovers specifically have become a threat on gaming platforms. Thesecan largely be attributed to relaxed KYC programs and partly to the cost structure of in-game items (currencies, skins, weapons, etc.). A large percentage of in-game items costs under $200, which allows criminals to conservatively acquire items through microtransactions. But those little things collectively add up—and the opportunity for gaming platforms to fight against these threats is more actionable today.
As a result, it has become more critical than ever to implement and enhance compliance controls to ensure the legitimacy and safety of customers, starting with Knowing Your Customers.
The First Step in Protecting Your Platform
Implementing an ID verification solution is the first and one of the most critical steps in securing your platform against illicit actors and activity. Simply put, you cannot fully protect your platform and customers without knowing your users. Failure to have ID verification in place severely limits a company’s ability to establish and grow successful Risk and Compliance programs.
ID verification enables gaming operators to validate new players’ authenticity before allowing them to create and fund an account. This provides the following:
- Assurance that existing players are genuine.
- Adherence to age restrictions.
- Fake account prevention.
- A deterrent to money laundering, account takeover fraud, and other criminal activity.
- Peace of mind to gamers and parents, and other guardians.
At their very core, games are vehicles for users to come together and share experiences unique to any other kind in the world. For some, they are an escape; for others, they are a challenge to overcome. Whatever your reason, the last thing you want to deal with are shady users harboring the intent to increase crime and illegality while simultaneously eroding the foundation of the legitimacy of your platform.
Building the best ID verification model for your platform
Implementing an ID verification model is a balancing act. You want it to be strict enough to discourage fraudsters but not so much friction that it prevents legitimate customers from wanting to join and play.
Typical steps taken when verifying the identity of someone include:
- Requiring users to provide basic identifying information such as legal name, date of birth, address, phone number, and email address.
- Analyzing users across social media via email address and phone number.
- Requesting high-risk users to upload images of legal documents such as a driver’s license or passport.
- Verifying the authenticity of provided information and documents by running them against public databases.
The better you can understand your users, the stronger your relationship becomes. With the ability to verify your users, you can better tailor new experiences for them while barring nefarious actors from manipulating your platform for financial and other variants of crime.
Technology is and has always been a bit of a two-edged sword. On one end, the innovation and leaps forward add value and provide a richer service/feature set to users around the globe. But without the proper checks and balances in place, the same leap meant to improve lives and enrich your end users’ experiences can be plotted to facilitate atrocities like money laundering, human trafficking, drug trafficking, and many other forms of illicit activity.
The key to effective identity verification begins with the end goal: Know Your Customer at the deepest level possible. Establishing and iterating processes and procedures to collect pertinent information and keeping it current will help you catalog your user base and help guide future decisions regarding innovation and bringing new features to the market.
These same techniques can also help drive your team to continuously monitor for outliers and illicit actors attempting to utilize your platform in ways it was never meant to be used. Running a “clean shop” will help ensure ongoing user safety and security while enriching the experience for your target audience on your platform and mitigating risk to your organization.
So the question is—are you positioned as an organization to weed out the bad apples from your platform?