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Sports betting: everything you need to know for your company to operate in Brazil

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1. Sports betting in Brazil

2. What is the regulatory landscape like?

3. Why should sports betting operators verify the user's identity?

4. What types of fraud exist in the sports betting sector in Brazil?

5. What are the main considerations for sports betting operators in Brazil?

6. How to balance identity, fraud prevention and customer experience?

7. Why work with Caf?

Sports betting in Brazil

The sports betting market in Brazil is already among the top five markets in the world, with almost R$ 4 billion in revenue by 2022, and expected to triple by 2026. A large population with a considerable market to serve makes sports betting a growth industry in Brazil. This growth, in large part, can be attributed to Brazilians' love of sports, especially soccer, and by extension the betting associated with it. Most of the soccer teams in the country are sponsored by companies that are somehow connected to betting. 

Casinos and gambling are the main drivers of the industry's growth in the country, although there are numerous other avenues such as poker, bingo, gambling, and lotteries available to users. The presence of various operators trying to gain market share through numerous consumer incentives is fueling the growth of this lucrative market. The same can be said for the spread of smartphones and Internet connectivity, which make it easier for players to participate in online sports betting.

Currently, due to legal restrictions, many sports betting operators offering their services in the country are based abroad. But the market in Brazil is now undergoing a major change, as the government has proposed regulations to provide operators with an enabling environment to establish their presence in the country.

With the proposed regulations coming into effect, many operators are looking to expand their operations in the country, further fueling the sector's growth. Here are the essentials you need to know for your company to succeed in the booming sports betting market in Brazil.

What is the regulatory landscape like?

Although sports betting was legalized in Brazil in 2018, it is still awaiting regulation and therefore cannot be said to have been released. As such, sports betting is prohibited in the country with the lottery being a government monopoly. Despite these legislative barriers, the development of the sports betting sector has seen massive growth.

The government now seeks to regulate the sports betting market in order to keep it within its own borders and generate financial benefits for the country's economy. Currently, sports betting operators in Brazil have set up their headquarters and servers abroad, which diverts potential revenues overseas.

Another reason why the government wants to regulate the sports betting market in the country is to safeguard the interests of its citizens, the players. The regulations will require operators to demonstrate local presence and economic viability; and aim to make them more aware of the need to encourage responsible sports betting for players. Operators will need to establish processes to verify their consumers and verify that they are over the age of 18. This would result in a safer online sports betting environment for consumers as services will be regulated and more controlled.

Check also: Regulation of the online gambling market: know the importance and how to prepare your company

Why should sports betting operators verify the user's identity?

Illustrative image of smartphone in which user performs facial recognition procedure to access sports betting site

Operators looking to establish their presence in the Brazilian sports betting market will be required to verify the identity of players attempting to access their platforms. This is in line with future regulations that expect operators to ensure responsible sports betting in the country and provide a safe online environment for consumers.

As a result, operators will need to verify the identity and age of each potential player to ensure that they are over 18. Verifying the identity of players accessing their platforms is also necessary for operators in Brazil to prevent fraud, which is a growing challenge in the country.

The sports betting market in Brazil is booming and has a huge potential for revenue generation, which makes it an attractive target for fraudsters.

Fraudulent activities not only disrupt the user experience, but users may lose confidence in the platform and, in the worst cases, choose to migrate to competitors, causing financial and reputational damage to the operator.

When operators can accurately authenticate user identities, they are better positioned to increase the security of their users by preventing these fraudulent activities. They can also remain in compliance with regulations and avoid severe penalties and heavy fines.

What types of fraud exist in the sports betting sector in Brazil?

Given the exponential growth and increased interest in the sports betting industry in Brazil, it is a hotbed for fraud, with the most popular types of attacks being bonus abuse, account control, and fraudulent withdrawals.

The most common types of attack include:

  • New fake account registration: by leveraging data leaked through data breach incidents and using bots, fraudsters can cobble together synthetic identities to create new fake accounts - sometimes up to hundreds and thousands of accounts - to collect bonuses, trick other users, or skew the results in their favor.
  • Account control: use stolen username and password combinations to hack into genuine player accounts with assets to resell them to third parties or use the compromised accounts for various types of crimes including money laundering, "Money Mule" and phishing campaigns, among others. Older accounts are of particular interest, as they can earn higher returns and help avoid detection.
  • Fraudulent withdrawals: transfer or withdraw funds from an account without the user's consent.

Some of the other ways in which fraudsters use fake and compromised accounts to exploit sports betting platforms are described below:

Age Fraud: Underage users falsify identity documents and use fake details to open sports betting accounts.

Collusion: Engaging in deceptive sports betting to deceive genuine users by deliberately losing or skewing the results in their favor.

Money Laundering: Laundering illicit money by routing it through various online sports betting accounts, exposing users to legal threats.

Credit card fraud and chargeback: Reloading sports betting account balances or performing microtransactions using stolen credit card details. Upon completion of the reload, a chargeback is recorded with the bank or credit card company, causing financial losses to the operator.

Friendly fraud: Challenging the sports betting purchase order by pretending not to have placed the bets to avoid losses. 

The sports betting industry in Brazil is vibrant and bustling. However, the participation of new users and operators due to the opening of the market will make it even more prone to fraud.

What are the main considerations for sports betting operators in Brazil?

Operators eyeing a slice of the sports betting market in Brazil need to consider that there are certain requirements that will play a key role in their efforts to succeed in the country. Some of the key requirements that potential sports betting operators should focus on are outlined below:

A competitive sports betting market: Operators looking to expand in Brazil should know that it is a highly competitive market. Operators offer various incentives to attract players to their platforms. To succeed, operators will need to devise and implement strategies that can differentiate them from others and help them gain a competitive advantage.

Player acquisition and integration experience: needless to say, operators must attract players to make the business work. The main consideration for operators here will be the customer experience, from the moment players access your site. New players expect instant and simple integration - from sign-up to deposit and first bet. Unnecessary friction or lengthy Know Your Customer (KYC) procedures can frustrate players and lead them to place their bets with other operators. Poor KYC can also increase the workload of manual reviews for operators' security teams. A streamlined customer acquisition and onboarding process can be a game changer for sports betting operators looking to establish their business in Brazil.

Regulations imminent: the government in Brazil is set to regulate the sports betting market in the country. The proposed regulations will force operators to promote responsible sports betting, and users under the age of 18 should not be allowed to access their platforms. Operators are expected to verify the unique CPF - Brazilian identity number - for each user and all bets associated with the user. Operators will also need to ensure that users who register on their platforms are not politically exposed or part of any restricted lists, or use their accounts for criminal activities such as money laundering. Sports betting operators will therefore need to accurately verify users to ensure regulatory compliance and avoid fines.

Increasing fraud: Fraud is a growing challenge in the sports betting market in Brazil, causing financial and reputational damage to operators and threatening consumers' online security. Operators must be aware that in addition to a seamless experience, consumers expect operators to ensure their online security. Operators will need to deter common fraud activities, namely: multiple accounts resulting in bonus abuse, attacks leading to consumer account breaches, and fraudulent withdrawals that not only cause lost revenue but also increase the burden of manual reviews.

Self-exclusion and player protection: operators will also need to prevent self-excluded individuals - seeking voluntary abstention - from participating in sports betting on their platforms. Sometimes these individuals may create new accounts to regain access or abuse. Operators must identify these individuals to ensure self-exclusion.

How to balance identity, fraud prevention, and customer experience?

To succeed in an ever-growing sports betting market, operators in Brazil will need to strike a delicate balance between seamless integration, optimal user experience, fraud prevention and regulatory compliance. While this may be tantamount to walking a tightrope, it will win the trust of users and regulators alike and allow them to have a significant share of this highly competitive market.

Operators who wish to establish their presence or seek to expand their business in Brazil should begin their preparations for KYC, age verification, fraud prevention, anti-money laundering checks, and protection of existing and new players as early as possible. They should consider working with a vendor that has adequate experience and expertise in user verification in Brazil - to get started as soon as the proposed regulations come into effect.

Why work with Caf?

Caf is a digital identity company that understands the Brazilian sports betting industry from the inside out. With the experience and expertise to verify and authenticate users with greater accuracy and less friction, Caf offers tailored solutions to meet the unique requirements of sports betting operators while delivering a superior user experience, higher integration rate, effective fraud prevention and regulatory compliance.

Global brands use Caf's market-leading technology to onboard millions of customers every year and grow their business with confidence. We remove the complexities of the onboarding process for faster and more accurate signups. With improved real-time user verification, operators can reduce false positives and deliver a great sports betting experience for their players.

At the core of the Caf platform are advanced computer vision machine learning models, an artificial intelligence-powered decision engine, and sophisticated identity orchestration that helps provide automated solutions for user onboarding, KYC, fraud prevention, authentication, and document verification. The platform combines business rules, workflows, data integrations and more in an easy-to-use dashboard to optimize customer journeys through the player experience. Caf can also enable biometric reauthentication to confidently validate users at the time of withdrawals and payments to help stop account takeover attempts and excluded players. Our biometric technology is iBeta certified and our document verification can validate the authenticity of over 3,500 Brazilian documents.

By combining this cutting-edge technology with data and biometrics, operators can quickly create and deploy multiple identity authentication workflows to help accurately identify players, comply with regulations, and reduce the risk of fraud.

To learn how Caf's end-to-end solutions can help you grow your sports betting business in the context of new regulations in Brazil, click on the image below to schedule a demo and speak with a Caf expert.

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