How to know your customers are who they say they are in 2017

As the borders of the egaming landscape grow ever wider, vendors are being required to get closer to their customers. Over the last few years, new international markets are being eased open in North America, Central Eastern Europe and Africa, and though the business opportunity these new territories offer is vast, so too is the regulatory requirement that comes with them.

The introduction of the Fourth Anti-money Laundering Directive exemplifies this increasing demand for compliance, but also demonstrates a significant opportunity for growth. The new wave of regulations seek to standardise anti-money laundering practices and align them with the mobile economy we now live in, stabilising what was formerly shaky ground for nascent markets. But this opportunity comes at a premium, and only businesses that can find elegant, robust and rapid due diligence solutions will reap the benefits from these new customer bases.

The most significant issues to have arisen as a result of this perfect storm of regulation, increased customer access, and new market opportunities are changes to Know Your Customer (KYC) processes. With new markets come new risks, and gambling companies are finding themselves faced with increasingly burdensome and restrictive compliance requirements to mitigate them. No longer is it sufficient to take the identity of your customers on trust; robust KYC is required to ensure businesses remain on the right side of the law and keep bad actors off their platforms.

Unfortunately, those robust processes haven’t historically aligned with the needs of egamers, who have some of the lowest tolerance for cumbersome ID checks than consumers in any other sector. Nor are they particularly attractive for gambling companies, who find their operational overheads swelling as they attempt to meet more demanding compliance measures.

KYC for the future

Enter KYC for the 21st Century. Though tougher regulations have closed doors for many incumbent suppliers, they’ve opened them to those who are able to provide automatic and thorough KYC and identity verification – even in territories where customers have poor credit footprints. New tools and technologies are being introduced to make knowing customers are who they say they are a seamless part of the gaming experience. Now, it’s possible to automate formerly arduous manual processes, smoothing out the user experience while ensuring that the right legal boxes are ticked.

A number of new solutions have sprung up in response to the increasingly diverse regulatory environment of recent years, and the market is moving towards more widespread acceptance of multi-layered, remote KYC checks. Powered by the latest technology, this new regulation technology (RegTech) ensures conversion rates stay high while keeping fraud rates low.

In particular, artificial intelligence and machine learning are coming to the fore as more and more gambling companies seek to outwit the most sophisticated fraud. Typically, fraudsters will look for patterns to spot what platforms do and don’t detect, so manual or rule-based software will always eventually be beatable; it’s just a process of trial and error to work out what can be passed through.

With machine learning, however, those rules are constantly evolving, making it harder, if not impossible for a fraudster to detect patterns. As criminal capabilities grow more sophisticated and penalties for non-compliance more severe, gambling companies will need to think seriously about adopting these technologies to remain not only compliant, but profitable. Fines are large, and for low-margin businesses in the gambling space, potentially lethal.

With the egaming market set to continue its rapid growth through 2017, it’s never been more important to invest in eKYC and identity verification. Gambling operators are becoming increasingly vulnerable as they grow – as more platforms start operating cross-border, the risk of money laundering increases, not least because of their vast user bases, and the variable quality of identity data by country.

To combat the 82% of identity fraud that’s committed online, KYC checks that offer ease of document and facial capture, combined with background searches, will become increasingly prevalent in the industry. Only by keeping up with the evolution of identity verification will gambling companies be able to keep compliant, keep costs low and keep customers happy.