Gaming: the real cost of in-app purchase fraud

In 2019, the global games market was worth a total of 148.8bn, with mobile game revenues accounting for 68.2bn - 46% of the total - a jump of 9.7% YoY.

The rise of freemium games

This reflects the growth in ‘freemium’ games - games that are free-to-play, with in-app purchases to continue past a certain point or upgrade/advance to another level. The customer can make microtransactions within the game itself - known as in-app purchases.

Some of the biggest F2P digital games are Fortnite, League of Legends and Candy Crush Saga.

In-app purchase fraud is particularly damaging for freemium games that allow the customer to make microtransactions through their own storefronts. Games with storefronts managed by Apple/Google will pay a commission to them and benefit from guarantees on chargebacks. However, these platforms will adapt their pricing dependent on the individual game risk level and chargebacks.

In-app purchase fraud method

How do fraudsters commit fraud on in-app purchases? Specifically, we’re focusing on fraudsters that use stolen cards to extract value from the game.

Fraudster activity:

• Create a guest account
• Use a stolen card to level-up/buy digital goods OR load the game virtual currency on the account
• Sell the account online
• Once sold, link the guest account to the buyer’s social media account

The true cost of in-app purchase fraud

Financial cost

For gaming app developers, the financial costs of in-app purchase fraud are worrying. As well as chargebacks which arise from the use of stolen cards, the app also loses the value from the customer who paid out to the fraudster instead of the app. Reselling goods bought with stolen card details can be a highly lucrative business for fraudsters - with items like rifle skins selling for up to $60,000.

Additionally, the cost to acquire a new user and get them to make an in-app purchase for the first time is increasing. It costs an average of $4.37 to acquire a new user for a mobile game, up 17% YoY. And to get a user to make a first-time purchase, it costs an average of $35.42.

Negative user experience

In-app purchase fraud disrupts the economics of a game and allows some players to gain an unfair advantage. This can destroy not only the game economy, but also the strong gaming community, which many games rely on for the longevity of the game. Developing a digital game is a long and expensive process, and so developers can’t afford to lose players and start from scratch over and over again.

How to prevent in-app purchase fraud on gaming applications

How can you stop fraudulent in-app purchases? It’s challenging, particularly when assessing new users with no purchase history.

We use a combination of machine learning and graph network analysis to identify when new accounts are a fraud risk. Here’s what to look for to stop fraudster purchases:

• Is the account linked to a Facebook, Google or other social media account? If no, it’s likely to be more high-risk.
• Does the account have a linked email? If yes, what is the email quality score? Low-quality emails with a high number of digits are riskier.
• Have you seen the device before? If it is a new user, there should not be any existing accounts linked with the device.

To learn more about how machine learning works to score users on their email address, location and hundreds of other variables, check out the machine learning insights page. To understand more about how graph networks enable you to link users by device, location or other shared properties, read insights on link analysis.