The COVID-19 pandemic has brought about an acceleration to a ‘cashless’ society, particularly in land-based venues. Do you view this as a positive for the gaming and payments industry and how can both take advantage heading into 2021?
Digital payments provide for better and easier regulatory compliance, whether that is with anti-money laundering requirements, understanding your customer (KYC) or even financial reporting. They also offer customers greater choice and can lend themselves to responsible gambling, with many banks now offering the ability to set spending limits or cooling off periods on their bank accounts which they are unable to do with cash. Cash is an expensive form of payment with the human resource cost of counting cash, cost of security transporting money, as well as bank charges for depositing cash.
The move towards digital payments equally brings the opportunity to combine the physical and online offering with an omni-channel solution. This can give operators a single view of the customer, whether in a shop or on the website providing an enhanced understanding of player behaviour. This understanding can be beneficial for responsible gambling reasons and it allows operators to provide more tailored or personalised experiences which can be a competitive differentiator.
With Payment Services Directive 2 (PSD2) to be fully rolled out next year, what impact will this have on the gambling industry? And what benefits will this bring, particularly when combating fraud?
One of the most notable elements of PSD2 is the introduction of strong customer authentication, which is set to come into effect from 1 January next year for much of Europe and 15 September in the UK. This will introduce the need to effectively have two-factor authentications to make a payment online. For example, where today a payment could just be made entering a debit card number, from next year this would need an additional layer of security such as a biometric scan.
“The move towards digital payments brings the opportunity to combine the physical and online offering with an omni-channel solution”
This security will help bring about a reduction in most elements of fraud and will save operators the direct cost of paying for this, as well as the indirect cost of managing these fraud cases and the associated cost of chargebacks. However, this additional layer of security also introduces a potential new layer of friction which could slow down or impede the player experience. This can be a concern when speed is of the essence such as during in-play betting.
There are, however, some exemptions to this additional level security that an operator can apply for at a transactional level through their payment provider. This will allow the operator to request that a payment does not have this second layer of security, which will in turn provide a quicker deposit experience. These exemptions have a number of qualifying criteria and cannot be automatically obtained, with certain dependency sitting with the payment provider themselves. That said, operators will need to understand and learn how to balance the need between enhanced security, and a frictionless payment experience. Again operators that are able to succeed in this area could have a significant advantage over competitors who have a less flexible approach.
What positives will open banking bring and how can it benefit payment operators in helping with user experience?
Open banking as part of PSD2 opens up the competition for access to offer services through an individual’s bank account. These broadly fall into two main camps: account information and payment initiation. The former allows accredited service providers to provide consumers and operators, with consent, aggregated information related to their bank account – such as spending behaviour. In turn, gaming operators can use this information to bolster their own understanding of customers whether for KYC, responsible gambling or other regulatory requirements.
The second allows payment initiators through open banking the ability to offer a new payment method that connects directly to a player’s bank account. I.e. it removes the need to pay via a debit card or ewallet. This introduces a new and exciting form of payment to players and operators alike. For consumers it provides secure, reliable and near-instant access to their winnings. For operators it introduces the ability to offer wider choice, reduced fraud and in many cases enhanced economics with reduced direct costs.
What else can we expect from 2021 in terms of product innovation and technology, aimed at providing a better payments service for players in the gambling industry?
The online gambling industry has always been at the forefront of digital adoption and innovation, with many players being early adopters of technology. As improved infrastructure and hardware enable operators to take advantage of delivering better player experiences, it’s really important that they consider the full customer journey from deposit to payout, to maximise customer loyalty.
“Regulation will continue to be a key theme for the online gaming industry. We have seen some movement with state level regulation in the US over the past few years”
Financial regulation has opened the door to innovations such as faster pay-outs and implementing these types of solutions are becoming increasingly important to meeting player expectations of what seamless service really means. Capacity, and being able to scale and respond to high volume events to meet demand, will also be a key driver for operators for the year ahead. They should be working with their providers now to ensure they are ready to maximise opportunities for 2021, such as the delayed UEFA European Championships.
Lastly, regulation will continue to be a key theme for the online gaming industry. We have seen some movement with state-level regulation in the US over the past few years. As this gains momentum with new states coming online – as well as developments elsewhere in the world like Latin America – established European operators can work with global payments partners to help expand and enter new markets.
