Businesses who provide gambling services often have difficulties with payment processing. There are so many concerns around online and in-person gambling that many processors won’t even touch these types of payments. Here, we take a deep dive into gambling payments, the difficulties involved, and some ways in which you can responsibly process them. But first, let’s talk about the industry as a whole.

The gaming and gambling industry hit $1 trillion in 2021 and continues to grow. In the wake of the Covid-19 pandemic and increased time spent at home, online gambling has increased significantly. The result of increased usage is obviously increased revenue for online gambling companies. However, the industry faces many challenges when processing these payments.

What Are the Most Common Challenges for Gambling Businesses?

Online and in-person gambling companies face a variety of challenges when it comes to payment processing. These challenges can have a huge impact on the bottom line for a business owner. Here are some of the key challenges you need to understand so you can find a solution and keep your business moving forward.

Changing Regulations

One of the biggest challenges facing the gambling industry is constantly changing rules and regulations. The industry is highly regulated to protect consumers and businesses from potential fraud. Business owners need to monitor their business practices and the laws that govern them to ensure they remain compliant.

Some of the regulations involved in the industry include Anti-Money Laundering (AML) and Know Your Client (KYC) requirements. These types of rules require merchants to work closely with their payment processors to stay ahead of the game. In many cases, payment processors can help business owners identify who their clients are and where they are coming from. This can assist in identifying potential threats.

Perception

In many states, gambling carries a stigma that forces casinos to be as proactive as possible to protect consumers from their own actions. Gambling carries the risk of addiction, bankruptcy, and even violence, which makes it a prime target for lawmakers. In an effort to mitigate these stigmas, many casinos place limits on how much their customers can spend at a given time.

These restrictions are referred to as velocity or volume limits. Limitations are designed to protect the consumer from getting into a critical financial situation. They also help mitigate the risk of buyer’s remorse and the subsequent actions that many consumers take when they experience it. (More on that later).

Fraud

As with any high-risk business, there is a huge risk of fraud in the gaming industry. Many gamblers, both in-person and online, are honest people who are simply enjoying the games. But there are also cybercriminals looking to cash-in on unsuspecting businesses and gamblers.

Casinos, OTB outfits, and online gaming businesses all need to be aware of the risk of fraud and implement protocols to protect their consumers. This includes a variety of information security measures such as:

• Data encryption
• Fraud detection software
• Multi-factor authentication
• PCI compliance (for card payments)
  

This is a very short list of the potential ways in which a business can protect itself and its consumers. Some businesses choose to implement the basics, while others go above and beyond to protect their gamers. Regardless of your strategy, remember that it’s your responsibility to protect your customers’ data.

Chargebacks

Every business that accepts card payments runs the risk of having chargebacks on their account. This is not a new phenomenon but can be a frustrating one. A chargeback is a transaction that was completed by the consumer and later reversed by the consumer.

In gaming, this happens when a customer experiences buyer’s remorse. When a gambler decides to wager large sums of money on a game, and then lose that money, they are more likely to go to their card issuer or bank and file a complaint. Basically, they tell their bank that it was a fraudulent charge they didn’t make. The bank will then reverse the payment, take the money out of the merchant’s account, and put it back into the customer’s account.

This is a criminal activity that is very hard to combat as a business owner. When these things happen, it is the customer’s word against the merchant’s word. If the merchant wants to take the customer to court, it’s a hard case to win because the favor is likely to fall on the customer and not the business.

High-Risk Businesses

The chargeback conversation leads us directly into a discussion about high-risk businesses. When a merchant participates in a high-risk business model, their payment processing options become limited. This is due to the increased risk of extending account services to these types of businesses.

When a bank or merchant account issuer reviews a potential new client, they look for risk levels. The higher the risk involved, the less likely the institution will be to grant an account to that merchant. High risk merchant industries include, but are not limited to:

• Gaming / Gambling
• Online supplement/pharmaceutical companies
• CBD/cannabis/tobacco/e-cigarette companies
• Adult entertainment and dating services
• Online credit repair services
• Membership or subscription services
  

This is not an exhaustive list but gives you a good idea of the types of businesses that are considered high-risk. These businesses usually pay more for their payment processing services and must adhere to strict regulations to avoid having their accounts frozen or closed.

Payment Processing Options for Gaming/Gambling Businesses

Although your business may be considered high-risk, it’s not impossible to obtain payment processing services!

Running a Successful and Responsible Gaming Business

Regardless of the challenges that face the industry, many companies run very successful businesses that are both profitable and ethical. When business owners consider both profit and reputation as equally important, that is a recipe for success and longevity! Here are some things you can do to run a safe and responsible gaming business.

1. Partner with a payment processor who understands your business and can help put the correct protocols into place. As mentioned earlier, it is critical to protect your customers’ data and it starts with choosing the right payment processor.
   
2. Offer flexible payment options for gamers, with parameters designed for their own safety. As a merchant, you always want to offer flexible options for your consumers and make it easy to do business with you. However, you need to also protect them from their own impulses. Just like a bartender must stop serving a person who has had too much alcohol, you too should stop serving someone who has hit their velocity or volume limit. Talk to your payment processor, financial institution, and business attorney to decide what those limitations should be.
   
3. Setup an e-wallet portal on your website where consumers can establish their gaming accounts. In this portal, use KYC protocols to verify who the gamers are and validate that the account numbers match their identity. This will help reduce the risk of cybercrimes against unsuspecting citizens.
   
4. Be smart when setting up payment options for your customers. Allowing them to fund their e-wallet with a credit card will increase the likelihood of chargebacks and buyer’s remorse. Instead, consider allowing gamers to fund their accounts using e-Checks, wire transfers, debit cards, cryptocurrency, and other methods that provide a finite amount of cash, rather than a line of credit. You may also consider allowing platforms such as Zelle and CashApp, which are directly linked to cash.
   
5. Be vigilant with your fraud detection and prevention. It’s your responsibility to take all the necessary precautions to protect your customers and your business from potential fraud.
   

Final Thoughts

Online gaming presents a variety of challenges that other online businesses may not face. However, it is possible to run a safe, responsible, and successful operation. You can do so by taking precautions to protect consumers not only from themselves, but from cybercriminals. In doing so, you will also protect your business, so it’s a win-win.