Challenges for operators
Securing credit card processing in the online gambling industry is quite difficult, especially if you are required to obtain a high-risk merchant account. Most payment facilitators expect prior processing history with acceptable levels of refunds and chargebacks, as well as proof that you have been able to scale despite the inherent challenges.
Given the legality of online gambling varies from state to state, these businesses and their associated payment processing accounts are typically labeled as high-risk. With this label comes a host of complications, such as higher fees and tighter regulations.
Beyond the high likelihood of an operator needing to open a high-risk merchant account, demand for processors themselves has boomed as online casinos have grown in popularity. The need for ample processors continues to grow in newly legal states, and the Covid-19 pandemic drove interest in online gambling across the country as the majority of gamblers were routinely confined to their homes for virtually months at a time.
To compound these challenges for gambling operators, many processors have indicated a lack of interest in dealing with the complexities of federal and state laws and regulations governing sports betting.
As regulators continue to improve upon the existing framework of legal gambling, I am optimistic that more payment processors will embrace the gambling industry—but for now, many challenges remain for gambling companies.
Profile of a great payment processor
With so many inherent challenges to identifying a suitable payment processor, what should gambling companies look for?
Given the difficult operating environment, online gambling merchants benefit from partnering with payment processors that specialise in high-risk processing. Ideally, such a payment processor will have experience in the gambling industry, which will enable them to navigate through the difficult regulatory terrain.Processors should also be dedicated to heavily monitoring transactions for potentially fraudulent activity, which is crucial to ensuring the long-term success of the industry, as well as focused on helping businesses get (and stay) approved for processing. At this time, companies like Fiserv and Global Primex are leading the way in processing payments for the legal, regulated global gambling industry. The importance of utilising a processor with the size, scale, and stability that these companies offer cannot be overstated.
Credit card processing for consumers
For a gambler to place an online bet, they must first fund their associated account. Credit cards remain one of the most common ways to fund mobile betting accounts, yet despite the widespread legalisation of online sports betting and gambling, it is not uncommon for customers to have problems with credit card deposits.
Some issuing banks may still automatically decline credit card deposits related to online gambling due to anti-gambling policies employed by the bank, though this is becoming an increasingly uncommon issue. Additionally, not all credit card brands work equally well for online sports betting, and some issuers treat online gambling transactions as cash advances, which can be subject to higher interest rates and fees.
While most legal sportsbooks accept credit card deposits, a handful of states prohibit funding betting accounts with any form of credit: namely Iowa, New Hampshire, and Rhode Island. Responsible gambling organisations like Entain Foundation US have expressed the main problem with this type of limitation: while well-intentioned, it disincentivises gamblers from using legal, regulated platforms, and encourages re-entry into the black market.
ACH payments, a type of electronic bank-to-bank payment, are emerging as a favoured transaction method for the gaming industry. These payments are made through the banking system, rather than through card networks such as Visa or Mastercard, which simplifies the transaction process.
Fiserv, for example, allows customers to process and deliver ACH transactions through their choice of deployment models, regardless of the transaction volume or size of your preferred financial institution.
Through their ACH Warranty offering, Fiserv also helps eliminate costly manual processes while expanding business services and offerings for gambling operators. Further, and perhaps most importantly, their ACH Warranty solution mitigates risk across their customers’ ACH payment processing system.
The importance of payment processing in online gambling cannot be overstated. For the industry to thrive, consumers and businesses alike need easy access to safe, highly efficient, reasonably priced payment processing. It is my hope that as the United States continues to embrace gambling, both culturally and politically, payment processing will improve, and ultimately enable this industry to flourish.
William J. Pascrell III, Esq. (BP3) is a Partner at Princeton Public Affairs Group, the largest statewide lobbying firm in the country; a Trustee for Entain Foundation US, a nonprofit dedicated to promoting responsible gambling, sports integrity and corporate compliance in the U.S.; and a globally-recognised gambling expert.