Any business in its core needs to have the function of accepting payments from its customers in order to function. And to do that, it needs to be integrated with payment systems, having multiple payment methods available for the customers.  

When it comes to online gaming parlors, it’s not enough to have 1-2-3 deposit and withdrawal options: here, sometimes dozens of payment methods in online casino come into play, allowing customers to choose what suits them best.

Due to numerous stigmas, either logically or historically associated with the activities of gambling establishments in particular geos, this has found its way to reflection in the payment channels available to gamblers. How? We’ll discuss the mechanisms in this article, along with other important aspects related to building payment systems in online houses of gambling:

  • Why having a variety of payment methods is important
  • Types of payment methods in modern gaming clubs
  • How all of this affects customer acquisition and retention
  • How gaming parlors themselves should handle operational activities related to implementing new payment methods
  • And other questions.

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Importance of Payment Methods

For the savvy reader or gambling business owner, it’s no surprise that most people don’t come to a gambling venue just to have a good time (they can do that by playing video games at home, watching TV, scrolling through TikTok, or grabbing drinks with friends at a bar). They come for the winnings. More precisely, for the chance of those winnings — big or small — that casinos naturally offer.

No one is under any illusions that a chance of winning comes for free. Yep, it is with real money. Which needs to be deposited into the casino account. From there, bets can be placed in various games, at the punter’s choice and discretion. Of course, you can play demo versions. But, firstly, not every gambling establishment offers them. And secondly, the winnings in them are also “demo”, not real. And there’s hardly any adrenaline. And you can’t put adrenaline in your pocket or make a sandwich out of it.

So it’s important for the punter to take their hard-earned money and deposit it into their gaming venue’s account. The account is automatically created when they register.

A large aspect of topping up the account is the ability to do it quickly and seamlessly. The smoothness of execution of that determines whether the person will become a client of the venue or not. Regular or not, too.

Remember how we mentioned above about stigmas associated with the activities of gambling establishments? So, transferring money to a gaming club is one of those stigmas that vary from society to society. And from person to person.

At the national level, it may be prohibited to play gambling games where you put money at risk, hoping for luck. Or not legally prohibited, but not encouraged or even openly condemned by society.

At a personal level, it may be a feeling of wrongness about what a person is doing — pulling money out of an already limited family budget and directing it to a gaming parlor, which is almost equivalent to drinking it away at a bar. What’s worse, a person might be having hungry children at home or the rent isn’t paid this month…

Or it could be quite the opposite. At the national level, gambling and sports betting may be highly encouraged, with their advertisements everywhere, and all citizens understand that gambling fills the national treasury. And at a personal level, the person is absolutely fine with it because they have won repeatedly before, they’re in a good mood, and their favorite gaming venue has a new game or a cool tournament.

Both negative and positive aspects influence a person’s self-perception at the moment of depositing in a betting club, and what payment methods they will choose for it.

So, if gambling is prohibited or discouraged at the national level, then, besides choosing to abstain from it, a person can also choose a payment instrument that will not allow their addiction to be tracked and that they are spending time in a gambling establishment in principle. An electronic wallet is perfect for this purpose, where alphanumeric identifiers of parties are used instead of names. 980w34okjnqo4i has just sent $35 to 09q4kjbq4j66. Convenient. And nobody will have a clue. Any other payment method that does not explicitly show the recipient and sender will also work well. The unwanted sender appears when the person withdraws their winnings. And if it’s stated that the amount was received not from “CosmicSlot casino” but from something like “Hightower and Blackburry Premium Solutions LLC,” it effectively hides their gambling addiction. These kinds of solutions are widely available in the market today: e-wallets, virtual cards, cryptocurrencies, mobile billing, voucher systems, instant banking systems, and some localized payment methods.

The same goes when the situation is viewed at the personal level of human perceptions.

If a person and a country are open to enjoying gambling and there is no stigma attached to it, then familiar payment methods will be widely used: bank cards, bank transfers, Apple Pay, Samsung Pay, Google Pay, instant banking, but also various e-wallets and cryptos, which are, after all, convenient and fast as heck.

The availability of a payment method in a specific geo and the ability to use it here and now also play a significant role in choosing a payment method. For example, if cryptocurrency transactions are not allowed, then crypto cannot be purchased using the balance of traditional banking. Or if prepaid or instant cards or money vouchers are not issued, then they physically do not exist in circulation in that geo.

As a result, the methods of payment available in the arsenal of gambling establishments determine in this or that geo how much people will use the services of this establishment, how much they will pay there, and how many people, in general, will play at this establishment.

Therefore, it is extremely important for betting club owners to assess the peculiarities of each geo not only in terms of marketing research from official sources but also to look at the stigmas of the society where it plans its activities, in order to understand which alternative channels are substituting official ones. It is also recommended to rely on the experience of local financial service providers, payment providers, and aggregators who are ready to offer payment integration in each specific geo through their payment solutions and gateways.

Types of Payment Methods

There are many payment methods in online casinos. Below we provide their categories and specific examples within these categories:

  1. Credit and Debit Cards:
  2. Visa
  3. Mastercard
  4. American Express
  5. Discover

Pros:

  • Widely accepted globally
  • Perform instant or nearly instant transactions in most scenarios
  • Come with extensive customer protection procedures, which are actively utilized around the world
  • Quite serious payment method safety applied to 99% of transactions thanks to PCI DSS globally implemented.

Cons:

  • There are some fees, sometimes, quite unpleasant ones, especially when it comes to cross-border transactions, cross-currency conversion, or cash advance fees
  • Since cards are very widespread, there are many methods of skimming, stealing information, and fraud, among other — broader — security concerns
  • Transaction limitations, such as cash withdrawal or a sum of one operation per period, with some operations forbidden at all.
  • E-Wallets:
  • PayPal
  • Skrill
  • Neteller
  • EcoPayz
  • MuchBetter
  • Pay4Fun
  • WebMoney
  • Yandex.Money
  • Qiwi

Pros:

  • Fast transactions
  • Quite nice security thanks to various authentication schemes
  • Absolute anonymity compared to bank cards.

Cons:

  • Some transaction fees are attached, although they are much lower than those in bank cards
  • Tedious account verification procedures might be in place
  • Limited availability in geos and they’re impossible to access without the Internet.
Payment methods on casino operations are numerous and we’re talking about them
  • Bank Transfers:
  • Direct Bank Transfer
  • Wire Transfer
  • Online Banking (via third-party services)
  • INPAY
  • AstroPay Direct
  • SEPA Express
  • Interac

Pros:

  • The oldest in the world method, which makes it reliable
  • High security of payments
  • Large transaction limits.

Cons:

  • Long waiting times for transactions to complete — in some cases, even months!
  • Complexity of making them due to documents asked (more docs for larger sums or suspicious receivers)
  • Hard-to-predict fees, especially in cross-border transactions.
  • Prepaid and virtual Cards:
  • Paysafecard
  • Neosurf
  • AstroPay Card
  • Boleto

Pros:

  • Anonymity
  • Strict control over spending
  • Accessibility in convenience stores and gas stations (in those geos where they are legally allowed).

Cons:

  • Limited acceptance of such cards
  • They are not present in a large number of countries around the world
  • Higher fees compared to regular cards
  • Card balance management inconvenience.
  • Cryptocurrencies:
  • Bitcoin (BTC)
  • Bitcoin Cash (BCH)
  • Ethereum (ETH)
  • Litecoin (LTC)
  • Ripple (XRP) and other

Pros:

  • Totally anonymous
  • The most reliable payment method today, skimming-impossible
  • Fast transactions
  • Low fees.

Cons:

  • Not too wide adoption around the world
  • Volatile cost compared to fiat money
  • Technical complexity of usage and transfer to/from fiat money.
  • Mobile Payments and billing:
  • Apple Pay
  • Google Pay
  • Samsung Pay
  • Boku
  • Zimpler
  • Siru Mobile
  • Tele2

Pros:

  • High convenience and accessibility — a mobile phone is always at hand
  • Cool security features like biometric authentication

Cons:

  • Low payment limits
  • Some gambling establishments do not allow payments of winnings to the mobile balance
  • Dependency from local mobile networks and mobile Internet.
  • Voucher Systems:
  • Flexepin
  • Ukash
  • Cashlib

Pros:

  • Anonymity and security
  • Control over spending

Cons:

  • Limited geo availability
  • It’s impossible to withdraw on vouchers.
  • Instant Banking:
  • Citadel Instant Banking
  • Rapid Transfer and other systems

Pros:

  • As is obvious from the name of the method category name — instant operations
  • Secure transactions
  • Wide global availability.

Cons:

  • Dependency on banking hours if your bank does not provide 24/7 operations
  • Need to have a mobile phone physically with you to perform transactions.

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  • Localized Payment Methods:
  • Boleto Bancário (Brazil)
  • OXXO (Mexico)
  • Paytm (India)
  • iDEAL (Netherlands)
  • POLi (Australia, New Zealand)
  • Przelewy24 (Poland)
  • Interac Online (Canada)
  • Klarna (Europe)
  • Bancontact (Belgium)
  • Alipay (Asia)
  • WeChat Pay (China)

Pros:

  • Fencing off punters from irrelevant geos
  • High accessibility in targeted geo
  • Reduced or absent transaction costs.

Cons:

  • Geo-restrictions
  • Currency restrictions.
  1. Other Alternative Payment Methods:
  2. Trustly
  3. Sofort
  4. Giropay.

Pros:

  • Direct bank transfers with instant deposits and fast withdrawals from gaming venues
  • Wide acceptance in many geos.

Cons:

  • Requirement of having a bank account, which fades away anonymity
  • Low transaction limits
  • Not present in all geos.
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Impact on Player Acquisition and Retention

As we’ve already discussed in one of the previous chapters of this article, the convenience of the payment channel for the punter is a fundamental criterion by which they determine whether they will play in this gambling establishment or not. Therefore, casinos in each geo where they operate should be thinking about the following:

  1. Availability of convenient payment methods for people in this geo. Of course, it’s not enough to limit oneself to only those that people majorly use here for purchases and online payments. Connect additional methods that they may possibly use to provide a worthy choice. Make sure to include globally popular methods and those specifically popular in this geo, plus cryptocurrencies, with a selection from several options. If you have different punter demographics, and this affects the payment methods popular among them, to make sure to include all these segments and ages, include all their favorite payment methods.
    1. The convenience of transaction execution in terms of limits and the absence of superfluous checks and filling out too much data to complete the payment.
    1. The ability for convenient payment when a person plays from their mobile phone — i.e., integrating the payment process with the mobile phone, for example, akin to Amazon’s one-click payment.
    1. Promotions aimed at popularizing a specific payment method that the gambling establishment promotes for financial or reputational reasons. For example, “Top up your balance from 0.05 Bitcoin and get 0.05 Bitcoin or 100% match to your deposit as a bonus.” Or something like “Make a deposit of $100 using Klarna and get 50 free spins.”
    1. Customer support to resolve issues with payment methods on casino operations is simply a must for any self-respecting house of gambling.

At the same time, it is essential to build a system of security and fraud prevention, which we’re discussing in the next chapter.

In the future, be sure to use personalization mechanisms for client offers to increase punter retention. Namely, analyze which channels the punter uses, at what time, and what amounts they deposit, and offer them personalized offers with bonuses to encourage them to use these channels even more. Are they depositing $100 to play roulette every Friday? Offer them to deposit $200, get another $200 as a playthrough-attached bonus for playing their favorite roulette, and the person will spend $200 instead of $100, being pleased that the gaming venue knows that roulette is their favorite game. Additionally, offer them a cool cashback on losses — and they will most likely lose both $200 of this payment in online casino and the cashback amount while getting significant enjoyment from gambling.

Security and Fraud Prevention

In addition to walking an extra mile to accommodate punters, online gambling establishments must also safeguard themselves by implementing comprehensive and modern security and fraud prevention systems. With their help, it’s possible to monitor, prevent, and inform relevant regulatory authorities about attempts of unauthorized access to gaming parlor databases, data theft attempts of various kinds, money laundering, and other fraudulent practices.

Modern security and fraud prevention systems include:

  1. Identity verification
  2. KYC and AML procedures
  3. Monitoring of transactions
  4. Regular verification of payments and extra verification and authorization of large, unusual, or suspicious payments
  5. Fraud screening tools
  6. Automatic reporting tools (to gaming parlor managers and to relevant state authorities within their competencies)
  7. IP geolocations
  8. Payment method restrictions and limits
  9. Chargeback monitoring and prevention
  10. Payment security compliance.

Most of these solutions are complex software provided by companies specializing in such solutions. Additionally, they can also be provided by payment operators who integrate payment gateways into gaming parlors. They have rich experience in such matters, as they professionally handle payments for years or decades, processing millions or even billions of payments annually, and thus are knowledgeable about monitoring and preventing suspicious activity all the way.

Regulatory Compliance

Regulatory requirements for payments vary in each jurisdiction. The only global standard is the PCI DSS requirements, which are a document and tool used in the payment card banking industry. The rest of the standards are regional or method-specific.

When an online gambling establishment introduces a new back-end or front-end system from scratch or upgrades an existing one, acquiring one of the modern solutions from providers, these systems typically already include security and compliance modules and settings regarding gambling and financial transactions. In addition to this, payment solution providers (payment gateways), if not yet integrated into the system itself, also comply with compliance requirements. Therefore, this issue is largely addressed during the implementation or upgrade stage of the system, with the involvement of both the betting club team and the implementation team from the software providers.

However, operational difficulties arise when operating a house of gambling in different jurisdictions (geos with different legal requirements). In practice, there are no identical requirements in two different jurisdictions, so it’s necessary to configure the payment system for different geos. In reality, this results in such differences:

  • Availability of specific payment methods in each geo
    • Limits on sending and receiving payments
    • Required payment data sent to external regulatory bodies, if such a requirement exists
    • Licenses and permissions obtained in this geo to accept and send payments
    • Practical AML and KYC requirements
    • Restrictions on marketing, bonuses, advertising, personal data protection
    • Presence or absence of geo verification when making payments.

In fact, any betting club, obtaining a gambling license or intending to do so, already adheres to the restrictions and requirements of that license, which include regulatory compliance. Each piece of license documentation contains detailed requirements that the betting club must comply with to obtain that license. And if it doesn’t deviate from the geos allowed by that license, there will be no need to perform different payment settings.

Payment Processing Costs

The profitability of a gaming venue is determined by various factors, with the most significant contribution coming from the funds deposited by punters into their balances and subsequently lost during play. Other sources of income for gaming parlors include revenue from advertising, partnerships with other brands, sales of branded and souvenir products, participation in offline events, and sponsorship with a share of the profits.

All financial transactions made by punters are associated with commissions. There are many of them, and they vary.

So, when punters make deposits or withdrawals from a gambling establishment, they may encounter the following commissions and fees:

  1. Transaction fees for the physical execution of payments in one direction or another. This may be expressed as a percentage of the amount, a percentage plus a fixed amount, or simply a fixed amount.
  2. Currency conversion fees (between fiat currencies and between cryptocurrencies, as well as fiat-to-crypto or crypto-to-fiat).
  3. Network fees (applicable to cryptocurrencies only).
  4. Service fees. For example, banks charge such fees for annual/monthly card/account maintenance. Online wallets may also charge this fee. Its absence may be conditioned by performing a minimum number of transactions over a period, ensuring the account is in active use.
  5. Cross-border transaction fees, to another country. A common occurrence for payments in national currencies and non-electronic money.
  6. Double conversion. When a person pays for something online or while on vacation in another country, their native currency may be exchanged into dollars/euros during the transaction and then exchanged again into the currency of the transaction if there is no direct exchange between them according to the payment system’s terms. In this case, with unfavorable rates or rare currencies, the difference between the actual price and the debited funds can be from 1% to 20%.
  7. Subscription service fees. In terms of casinos, this could be the purchase of VIP offers or status.
  8. Dormant account fees — if a punter does not access their account in the payment method for a long time, a fee may be charged for inactivity.
  9. Replacement fees for physical payment instruments. For example, for a new card reissued before its expiration date (lost/stolen). Or for issuing a new ID token/face ID required to confirm transactions.
  10. Payment reversal fees. For example, a customer wants a refund for a service they did not like. For this, the bank or other operator may demand, for example, $50. Or dispute the transaction, saying that they did not consent to its execution and the debiting of funds (such disputes, by the way, are part of a common refund fraud scheme, but that’s a topic for another article.)
  11. Fees mainly associated with payment cards: for cash withdrawals, for transferring a too-large or too-small amount, for activation, for duplicates, for re-issuance, and for purchases in foreign currency. They may or may not exist, depending on the bank.
  12. Fees for topping up a mobile balance or debiting it for non-standard services (which can include online gambling).

The financial model of an online gaming venue can be built on different approaches regarding how much it participates in all these commissions.

For example, a betting club may absorb some of the commissions mentioned above so that punters don’t have to bear them. The second option is to leave the punter only with the commissions associated with specific transaction directions — only for deposits or only for withdrawals. The third option is not to compensate for anything. The fourth option is to even earn using certain kinds of commissions. As a rule, gaming parlors widely use the fourth option with elements of the first and second. Thus, the commission earnings of the gambling establishment occur through:

  • Currency conversion (punters are offered exchange rates significantly or slightly worse than market rates when they convert balances from one currency to another).
    • Fees for in-game perks purchases, such as free spins, bonus money, or tournament participation. These are rather not commission income, but part of the direct business model of the gaming parlor, which is built, among other things, on selling these things to punters.
    • Redemption fee: when a punter uses a rare payment instrument to top up their account, such as a prepaid voucher or discount/prepaid card.
    • Withdrawal fee from the gambling establishment balance. A frequently used option, which, however, does not apply to the payout of progressive winnings, according to their rules.
    • Inactivity fee. Gaming venues may set this if a punter does not access their account for a long period and does not place bets. From a logical point of view, this is justified by the devaluation of money kept on the account due to inflation over a long period. Therefore, a service for account maintenance, for keeping it active, is something that various organizations around the world often use, not just gaming venues.

Depending on how much the gambling establishment will participate in paying certain commissions for the client, the decrease in the end financial results will depend, on the one hand. On the other hand, people like it when institutions pay commissions for them, so they react to this by increasing loyalty. Therefore, each gaming venue chooses a balance between earnings and punter loyalty.

To offset commission costs, negotiations can be conducted with the payment service provider to reduce the payment for transactions, provided that there will be a good number of them per year (in terms of amount and quantity).

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Case Studies

The 2022 study (the full text of which can be downloaded in PDF format here) examines many examples of how payment systems affect the operation of online gambling establishments. It draws numerous conclusions regarding the nature, security, and impact of these transactions on both establishments and punters. Specifically, it notes that with the development of the Internet and the bandwidth of communication channels in general and online casinos in particular, as well as online betting and payment technologies, the groundwork was laid for the rapid development of alternative payment channels for gambling establishments.

A significant boost to the development of such channels came from formal bans on financial transactions for depositing funds to online gaming venues and withdrawing money from them in various countries. In response to such bans, the development of digital Yuan and payment systems like Neteller, WireCard, or Skrill, have emerged. There has also been an increase in schemes to circumvent formal prohibitions on direct transactions related to gaming parlors. For example, instructing other recipients/senders not to be named in any way that would resemble a casino. Or specifying other misleading payment details. Or participating in schemes involving third-party transfers acting as intermediaries in such payments to conceal the chain of formal ultimate beneficiaries of transactions.

Furthermore, this study revealed that the use of many payment options is an effective scheme for the potential circumvention of KYC and AML procedures. In particular, cryptocurrencies remain the primary opportunity for this. But prepaid cards are also involved (they may or may not be present in a specific jurisdiction, depending on laws permitting or prohibiting their circulation). Prepaid cards can be reloadable (e.g., through linkage with a bank account), non-reloadable (single-use, disposable after use), virtual prepaid cards, and cryptocurrency prepaid cards, both reloadable and non-reloadable, operating with one or many cryptocurrencies.

Of course, the implementation of multiple payment channels does not automatically mean that a gambling venue wants to hide from the scrutiny of regulatory bodies, intends to activate shadow operations, and deceives customers. The implementation of many payment options helps customers gain easier and faster access to gambling for money, which makes sense for many people only when their balances are updated with deposits and withdrawals quickly.

On the contrary, the gaming venues themselves are more interested in preventing abuses related to payment systems. According to a study by Paydo.com, implementing control over financial payments helps reduce risks and direct costs associated with the following most common types of fraud committed by punters (with respect to the gaming parlor):

  • Payment system fraud (6%)
  • Chargeback (5.5%)
  • Opposite betting (2.5%)
  • Money laundering (10%)
  • Bonus abuse (76%).

Future Trends

Current statistics show that approximately 70% of all transactions in online gambling establishments are made through credit cards (Visa, MasterCard, Amex, and other common ones). Meanwhile, the use of e-wallets is also growing, at about 6% annually in their volume (or about 0.3-0.5% in the total volume of all financial transactions). However, the growth of cryptocurrencies is incomparable to anything else today, showing an annual growth rate of transactions at 100% and higher for several years in a row. In the coming years, standard credit cards will steadily decline in popularity, giving much more way to cryptocurrencies, online wallets, mobile payments, and other alternative methods.

A future increase in the number of payment channels is also anticipated due to the emergence of new alternative payment systems: e-wallets, cryptos, mobile payments and billing, localized payments relevant for particular geos, and other alternative payment methods. Additionally, further development of blockchain technologies will impact not only the payment channels themselves but also the entire gaming industry when online betting clubs and game developers begin to integrate it into all aspects of their operational and gaming activities.

Conclusion

The payment system in gaming clubs is one of the cornerstones of success. The amount of revenue flowing into the accounts of the gambling establishment depends on how well it covers all aspects of a specific geographical area and individual preferences. So, since the depositing of money by players constitutes the primary source of income, a properly structured payment system should take into account various factors, including legal, historical, personal, systemic, and compliance.

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