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Kevin Smith

Tackling Fraud with eSuccess

24 November 2000

According to various reports, credit card fraud costs website operators $9 billion a year. By 2003 the cost could reach $15 billion. That said, it's one of the biggest issues facing the online gaming industry, and by lending a hand to operators fighting the war, eSuccess of Canada has subsequently carved itself quite a niche.

A site can be put out of commission if stolen credit card numbers fall into the wrong hands or if less than scrupulous gamblers try to deny charges after a losing round at an online casino.

"Chargebacks," when a customer denies authorizing a charge, and stolen card numbers, are the two biggest elements of credit card fraud for online operators. Meridien Research, which published the multi-billion dollar projections on fraud, also says site operators can expect fraudulent chargebacks to make up 30 percent of credit card transactions.

For years, eSuccess has been a leader in helping online casinos and sportsbooks protect themselves from credit card fraud.

The company is one of many groups to specialize in security and fraud management solutions for the e-commerce sector. But, it is the only company that provides those services only to the online gaming and lottery industry.

Michael Meeks, president of eSuccess, says that while the 30 percent figure tossed out by Meridien is probably a valid figure, his firm has much lower goals for its clients.

"We shoot for that to be down in the 1 percent range," he said. "With the products we offer, those are very attainable goals for us and our clients." The company's efforts are based on two programs--Citadel and Integrity--facilitate real-time auditing by checking credit card numbers to see if they've been lost or stolen. They can also check the history of the user and see if he has a high rate of chargebacks. Further, they give operators access to a massive database on the user's habits and legitimacy.

The key to the program, says Meeks, is the database. "We share it with all of our clients," he explained. "It is set up to cross-reference e-mail addresses, IP addresses and credit card numbers. When someone has a tendency to charge-back, they usually will do it with all their credit cards."

Most programs, according to Meeks, just check the one credit card that is being used in that particular transaction. eSuccess is able to check multiple cards that the user may have. If there is a bad history on the others, they can then block the transaction before the operator is out any money. Cutting off the fraud before it starts is the easiest way to handle the situation, he says.

He continued, "The most dangerous thing for an online gaming operator to do is accept business from someone they don't know anything about. If they don't know the user's history, they won't be likely to take a chance on them. Of course they could be losing money if the user is legitimate, but if they aren't, it could wind up costing them more in the long-run."

And as more and more operators sign with eSuccess, the database continues to grow. Meeks explains that while companies are able to share information with each other, they still own the rights to the information which they generate themselves.

"The data resides at the site," he said. "Internet gaming sites and regulators run our system. With our security being what it is, we are comfortable that our data isn't going anywhere."

That confidence has Meeks cringing every time he reads or hears about the lack of protection on the Internet.

"We disagree we all these articles that say there is no regulation and protection," he explained. "We are able to protect both the site and the player with our systems."

He also points out that while the companies own the data, eSuccess acts as a custodian for it, and it can be returned to the client and removed from the Citadel system upon their request.

In addition to looking out for charge-backs and fraudulent credit card numbers, eSuccess also keeps an eye on other problem areas.

"Hackers can be detected immediately," said Meeks. "We also have the ability to detect any fraud coming from within the company."

Since its formation in 1999 as a subsidiary of Riptide Technologies, eSuccess has created a niche in the development and integration of lottery systems to the Internet.

Integrity has grown from its foundations as the independent monitoring system for some of the worlds most stringent online lottery operators--including the Connecticut State Lottery and the National Lottery of South Africa--and is the recommended monitoring system for many of the world's online lottery suppliers.

In addition to be chosen for many national and state lotteries, eSuccess was picked as the supplier of risk management services for the Interactive Gaming Council almost a year-and-a-half ago.

Meeks says the partnership with IGC was critical in letting the industry know how much work his firm had put into meeting such high standards.

He explained, "We spent a lot of time and money addressing privacy laws. Our security is the best out there and being able to meet the standards set by IGC says a lot about our products."

eSuccess also relies heavily on the $128 billion lottery industry. As lotteries continue to integrate Internet operations, the demand for the company's products should rise. Further Meeks believes that the potential of the $650 billion land-based casino sector venturing further into the online world could have an enormous impact on his firm.

"A big thrust will be in the United States and Canada as more state and national lotteries go online," he said . "We are well positioned to help them make that move."

Also contributing to the growth of the company has been the ability to sign on new clients in large quantities instead of one at a time.

"We have started going to processors instead of individual sites," he said. "That way we are able to sign up a lot of different sites at once instead of going to each one and trying to get them to sign on with us."

Citadel was created to offset what Meeks feels is an upward trend with credit card fraud and the Internet, with online gaming sites being at the top of the list for fraudulent claims.

Those sites that aren't protected can lose loads of money. Meeks gave an example of an Australian site that was doing $30 million a month in business. When eSuccess approached the casino about doing business with them, the operators assured Meeks and his staff that there was not a fraud problem on their site.

Then in one month the site lost $2 million, and even more importantly, lost the trust of many in its players.

As eSuccess looks to grow and expand its operations, it is planning on steps to help with the projected expansion. Although the company has what Meeks calls a "fantastic" staff of sales and marketing people, the company plans to go public early next year to raise capital in hopes of expanding those operations.

"We need more legs to do more sales and marketing," Meeks explained.

Until then, Meeks and his staff will continue to help online gaming operators fend of as much fraud as they can.

Tackling Fraud with eSuccess is republished from
Kevin Smith
Kevin Smith