Payment processing has been problematic for the young iGaming industry in the US

Online Gambling Payment Processing Climate Could Improve With Sports Betting

online gaming payment processing climate

When the New Jersey online gambling industry went live in November 2013, there were plenty of hiccups. When sports betting goes live, you can expect similar speed bumps.

One of the biggest hurdles legal online gaming had to overcome was the alarming number of credit card transactions that were declined. Things have certainly improved, but even five years in, payment processing continues to be a thorn in the side of the industry.

After years of denying offshore gaming transactions, banks and credit card providers haven’t shown much of an interest in changing longstanding policies in order to give special exemptions for the trio of states that legalized certain forms of online gambling.

To shed some light on how online gaming payment processing has changed over the past five years, and what problems still exist that could impact legal sports betting, Online Poker Report reached out to Neil Erlick, the executive vice president of Business Development, Payment Processing at Paysafe.

The role Paysafe plays in online gaming

Paysafe is one of a select few payment companies that works with both consumers and merchants.

The company offers a wide variety of products and services, from traditional payment processing solutions, to digital wallets (NETELLER and Skrill), to the prepaid Paysafecard.

“With more  than  five years of experience in providing online payment solutions  to  regulated state and  provincial lotteries in North America and over 15 years of providing secure payment processing to licensed  iGaming operators in Europe, Paysafe is in a unique position to identify opportunities that goes beyond  our standard payment processing  capabilities,” Erlick told OPR.

“Our payment processing solutions encompass all of  the  tools and services that merchants require, providing reliable, engaging and pleasant customer experiences  in a global environment, and are powered by market‐leading technology, extensive internal and external  relationships, and outstanding service.”

Paysafe is also the parent company of the Income Access Group.

Income Access provides affiliate tracking solution to more than 200 individual gaming affiliate programs across North America and Europe. The company is the sole supplier of affiliate marketing software to regulated online casino and poker brands in the New Jersey and Nevada markets.

Getting everyone on the same page is vital

Since New Jersey’s slow start, payment processing has improved, but there is still a long way to go.

“We have seen a lot of difference being made with respect to credit card acceptance,” Erlick said.

Erlick highlighted the new Merchant Category codes (MCC) for legal online gaming that were installed in April 2015, and other improvements include:

  • Ongoing outreach to banks and credit cards
  • Steering customers to accepted payment methods
  • The addition of new payment processing options

According to Erlick, offering a one-stop-shop of payment processing options is also helpful, as it streamlines the entire process.

“Through a single platform, Paysafe is able to ensure US iGaming operators receive connectivity to best‐in‐class payment service providers, and customizable, cutting edge reporting for seamless reconciliation. This ultimately means that their customers would be able to make deposits at all times, whether it is cash, credit or debit, prepaid, and / or digital wallets.”

“Our established expertise in  the iGaming, esports, provincial lotteries and online gambling sectors  for over a decade has led us  to continuously enhance and  tailor our payment processing capabilities. And  keeping that in mind, it is important as a provider to be ready to have an answer for every customer that  walks through the door in to provide value and growth in the market.”

A nudge in the right direction

Even with the new MCC codes for legal online gaming transactions, a significant number of financial institutions have maintained their policy of declining online gaming transactions, legal or illegal.

Reason being, with only a handful of states offering legal online gaming, there isn’t a lot of pressure on credit cards and banks to change their policies.

Until banks start to bend (and they might if enough states legalize online sports betting), online gaming sites will have to make the best of a tough situation.

One way they’ve done that is proactively steering customers towards credit cards with high success rates or alternative payment processing methods.

Most New Jersey online gambling sites not only list “popular” (read as, rarely declined) payment methods, they also suggest an alternative method if the first is declined.

“The operator can play an integral role in the payment choice as some platforms can be  sophisticated enough to guide them with what payment methods are available from the start when  entering into the system,” Erlick said. “It can also be a matter of consumer preference, as consumers will try out or  have their preferred way of playing in mind from the start.”

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Are digital wallets and prepaid cards the answer?

Additionally, as the market has matured, more and more alternative methods appear.

The usage of digital wallets like Paysafe’s Skrill or NETELLER have made great strides as an alternative payment processing option. But as Erlick notes,  there’s still a lot of room for growth.

“Between Skrill and NETELLER combined, the two digital wallets move billions of dollars around every  month. By working with the majority of regulated officers around the world, we’ve noticed that the  percentage of online sports betting/gaming transactions will vary greatly depending on the payments  landscape and infrastructure within the country, as well as its cultural and technological considerations.

“Sports betting in places like UK is one of the largest markets and our research suggests that over 50 percent of UK consumers have used a digital wallet in the past year.

“While the US is currently lagging slightly behind, we expect this to grow in the coming year with the recent introductory of sports betting in the US and quite quickly catch up with the UK.”

One enhancement that has yet to make its way to legal US online gaming markets are Paysafe’s prepaid cards.

“While Paysafecard is not yet operational for gambling operators in the US, we look forward to its imminent launch,” Erlick told OPR. “As one of the global market leaders in the field of prepaid online payment methods, Paysafecard serves millions of customers in Europe. Based on our many years of experience in the  gambling sector and consumer behavior in the US, we are very excited to see the tremendous reach it  will bring based on its exposure to the rest of the world.”

The sports betting difference

The US will need to reach critical online gaming mass in order for payment processing to take the next leap.

The addition of Pennsylvania in the near future will help, but the combined population of the four online gaming states — Nevada, Delaware, New Jersey and PA — represents about five percent of the US population.

When that number approaches 25 percent, banks and credit cards that currently prohibit online gaming transactions will have no choice but to revisit their policies.

Reaching critical mass will require multiple states to launch online sports betting.

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Steve Ruddock
- Steve covers nearly every angle of online poker in his job as a full-time freelance poker writer. His primary focus for OPR is the developing legal and legislative picture for regulated US online poker and gambling.