Dictionary

Promo Abuse

Promo abuse, short for promotion abuse, is a fraudulent practice where consumers abuse promotional offers. Commonly, it sees consumers abusing offers such as sign-up bonuses, referral bonuses, and voucher codes to receive greater discounts or freebies than was intended by the company offering the promotion.

Some industries suffer promo abuse more than others. It is a particular headache for the online gambling industry, with many iGaming providers grappling with promo abuse (along with multi-accounting and authenticating users) as part of their Know Your Customer (KYC) obligations.

The online gambling market had a value of $45.8 billion in 2017 and is projected to more than double in size by 2024, growing to a value of $94.4 billion.

Within this dynamic landscape, some providers report that as many as 26% of the accounts registered with them are bad users, fake accounts, and multi-accounting users. Tools such as Tor make it relatively easy for individuals to hide their identity and abuse promotional offers through repeated use.

Promo abuse is not the same as promo fraud. Promo abuse is when a customer behaves badly and uses promotions multiple times or in a way that is contrary to the spirit in which they were intended. Promo fraud, on the other hand, is where organized fraudsters exploit promos at scale through an organized attack, using methods such as creating synthetic IDs and using fresh IP addresses.

Promo abuse is also not the same as the charmingly named casino whoring, which is a type of digital advantage play that sees a gambler try to exploit a free money offer during a promotional event.

Promo abuse generally works through multi-accounting. This is where one customer creates more than one account. For example, they create one account using their work email address and another using their personal email address.

That customer may then be able to take advantage of sign-up bonuses or voucher codes for free discounts or deliveries on multiple occasions. Such customers may also give referral bonuses or offers to themselves – i.e. from one account to the other.

By abusing promotions in this way, the customer is costing the business money. Many online gambling companies rely on promotions to attract new customers and encourage referrals, yet promo abuse can result in platforms running at a loss. And the issue is certainly not limited to the iGaming sector: Any business that offers an online promotion, whether it produces goods or runs services, can be a victim of promo abuse.

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Examples of Common Promotions That Are Vulnerable to Abuse

Some of the most commonly abused promotions involve exploiting the way that many companies use sign-up bonuses, referral bonuses, and vouchers.

Let’s look into each one more closely.

Type	Explanation
Sign-up bonuses	A sign-up bonus is a one-time payment or freebie that is intended to give a new customer an incentive to give a company a try. Sign-up bonuses can involve such benefits as money off a first order or the chance to enjoy free samples. Customers who abuse sign-up bonuses tend to do so by creating more than one account, which allows them to benefit from the sign-up bonus multiple times.
Referral bonuses	Referral bonuses are designed to incentivize existing customers to get their contacts to sign up for a service. The customer essentially acts as a marketer/salesperson, with the referral bonus rewarding them for doing so, usually through money off their next order. Many referral bonuses often reward the new customer as well as the individual offering them the referral. By creating multiple accounts, a customer can claim both elements of the referral bonus for themselves.
Vouchers	In the online space, businesses use voucher codes for a range of promotional purposes, from temporary discount offers designed to boost sales, to free delivery offers designed to reduce cart abandonment rates. Companies that regularly use formulaic promo vouchers (such as XMAS2020, XMAS2021, XMAS2022, and so on) are at risk of customers guessing their promo codes and using them to obtain discounts that weren’t meant to be offered to them.

Estimates suggest that bonus abuse costs online gaming companies up to 15% of their gro s s revenue. Sign-up bonus abuse is a particular risk because it is so easy for customers – and fraudsters – to carry out. Compounding the problem is that many industries use sign-up bonuses routinely to win business.

This means that companies may feel obliged to offer sign-up bonuses to keep up with the competition. And in so doing, they open themselves up to promo abuse.

Multi-accounting is at the heart of sign-up bonus abuse. The temptation to receive a sign-up bonus each time they order from a company may lead shoppers to open multiple accounts using different email addresses, for example. A difficult economic climate, where families are facing financial pressures, can also push some customers towards this kind of promo abuse.

There are numerous steps that companies can take to protect themselves against bonus abuse. Top of the list is having a decent system in place to detect such abuse. After all, if a company can’t detect the abuse, it has little chance of preventing or stopping it.

Let’s now look at some of the other steps that companies can take.

Type	Explanation
Robust KYC procedures	By verifying who their users are, companies can crack down on multi-accounting. KYC plays a key role in this. Companies can ask for age verification, address verification, ID verification, and so on. They can also build up risk scores for each customer using methods such as device fingerprinting, digital footprint analysis, IP fraud score analysis, and behavior and velocity checks. The more robust the approach to KYC, the lower the risk of promo abuse through multi-accounting. That said, companies must also be wary of the friction that such checks introduce. If customers have to jump through too many hoops to set up an account, they may take their business elsewhere.
Complex bonus rules	The more complex and strict bonus rules are, the less open to abuse they are. This is particularly relevant for online gaming companies, which can implement strict requirements around withdrawals and the number of times that players must play the bonus amount.
Geo-based blocking	Users from certain countries and territories pose more of a risk of promo abuse. By blocking users from those locations, a business can help protect against bonus abuse. Of course, this also means the business will lose out on genuine customers from the blocked regions.
Lowering bonus payments	Lowering bonus payments can make promo abuse less attractive to those who might otherwise be tempted to carry it out. However, lowered bonuses can also mean that customers are less incentivized to sign up for a service or to refer their contacts to it, so there is yet another balancing act that must be taken into consideration here.

While there are many other methods that companies can use to combat promo abuse, these four approaches reflect some of the key ways to be prepared. Put simply, they reflect what fraudsters look out for and, therefore, how you can thwart your enemy – by knowing your enemy.