Payments. One short word, but one that comprises a whole host of issues and concepts that we don’t ever take a minute to consider, such is our preoccupation with getting what we pay for immediately. Countless transactions are currently taking place all over the world, and it’s all over in the blink of an eye. But where does your money go? Who deals with it? How does it get to the right place?
Fortunately, several payments companies are on hand to answer these questions and more, and explain just how important a role such companies play within the gaming industry, as well as touching on the main issues they deal with on a day-to-day basis, such as security and variety. And with a pandemic continuing to frustrate many within the industry and indeed throughout the globe, the future of gaming payments is also explored by our experts.
Variety is undoubtedly key to the success of countless industries, and with increasing customer demand across each and every vertical, the gaming industry is certainly no different. Variety within payments in gaming is subsequently as important as ever, a notion shared by both John Mallia, Gaming Accounts Team Manager at Trustly, and Zak Cutler, CEO of North America iGaming division at Paysafe.
According to Mallia, such variety is imperative in order to deliver the best possible user journey. “As we consistently see in our own research, players have different payment preferences depending on which country they are in and what payment methods are available,” he says. “We are seeing an ongoing shift where open banking is constantly growing and taking over more traditional types of payment methods such as cards and wallets. Making sure that you offer the right type of payment method and one which is trusted and delivers the best user journey is imperative.”
Such an approach adds Mallia, “not only helps with acquiring users, but also with extracting the maximum value in the most efficient manner. In such a competitive market and with everyone striving to be the best, ensuring that you are at the head of the queue is a necessity, not a luxury.”
And for Cutler, “offering payment variety gives players choice when faced with a credit or debit card decline,” which he describes is an ongoing albeit improving issue in the US market. “A brand with a range of alternative as well as traditional payment methods is more likely to appeal to every player profile,” he adds. “For example, sports bettors who prefer using cash offline are more likely to choose and remain with a brand offering eCash for online wagering.”
Research from Paysafe from May 2021 showed that digital wallets are the preferred online payment method of global consumers (40%) after credit and debit cards, drawing a conclusion that “iGaming brand with a digital wallet is going to maximise customer stickiness and therefore its overall revenue and growth.” But what does all this variety actually mean for payments companies? Well, it means adapting to the rapidly moving global gaming market, which is undoubtedly easier said than done. When Gambling Insider asked AstroPay CEO Mikael Lijtenstein how difficult this can be for payments companies, he responded: “The payments ecosystem is incredibly complex. It involves many different players ranging from traditional banks and non-banking institutions to disruptive small fintechs.
“In the context of increased competition and unprecedented digitalisation accelerated by the Covid-19 pandemic, companies need to demonstrate a level of innovation and agility to keep up with the changing landscape of payments. As consumer demands for richer payment options grow, new types of fraud, especially end user targeted scams such as phishing and identity theft, are adding an extra layer of complexity in payments.”
Lijtenstein continues by suggesting that coordination is key to achieving any form of success in the industry, explaining that “innovation and the growing range of possible payment methods are inevitably affecting businesses of all sizes.” This transformation is not, however, a simple task. “Any change within payments requires coordination between different operators of the payment system, and to be successful, they need to adopt solutions that are used by both consumers and businesses,” he says.
AstroPay’s CEO concludes by suggesting there is only one thing payment companies can do to stay relevant in the modern era, and that is to evolve.
“Payment is the beating heart and soul of all businesses and companies have no option but to evolve to keep up. It is fundamental to foster a trusted relationship between users and their payments service of choice, and that trust can only be achieved with innovative solutions rooted in deep knowledge of the industry, particularly of the risks involved, both traditional and new challenges.”
A GROWING INFLUENCE
The influence of payments within the industry is something that certainly cannot be ignored, with each and every vertical seeing signs of this grip that payments has on the current gaming scene.
For Amit Klatchko, Founder & Director, Praxis, this influence has “grown tremendously year-to-year in the online gaming industry.” He explains that there are several reasons for this, including UI/UX, player experience, powerful and emerging markets with localised solutions, and the fluctuating risk appetites of acquiring banks. This, he says, “has led to various challenges requiring additional work efforts, and in turn, it has created new opportunities for payments and service providers.”
More important, however, suggests Klatchko, is the evolving of operators over time. Operators now realise that it is “hugely advantageous to use reliable and efficient technologies” in a bid to have “direct integration with local payment providers worldwide.” Such technologies offer operators the opportunity to negotiate and onboard directly with those providers, rather than using an aggregator, which “would be more expensive and would leave them overly dependent on a single provider,” he adds.
For Gemma Jones, Trust Payments’ Gaming Business Development Manager, payments “continue to have a considerable influence on the gaming industry,” particularly in online casinos and lotteries, which sit at the core of the player’s experience.
She suggests that, for the industry to continue to grow, it must adapt to its user’s preferences, while also actively integrating new payment methods to suit their needs. When doing this, Jones explains, operators have to think quickly about pay-outs and how they are made to their users, “considering the best ways to make the experience as frictionless as possible.”
Jones says video gaming strikes a similar chord when it comes to the increasing importance of payment processes, which is “mainly due to practices adopted by large video games providers, which use tokenisation to help their users activate new products. Sales are boosted by the lack of friction that users experience when purchasing a video game without inputting their card details, but by merely using their Steam, Apple Pay, or Google Pay accounts.
“This practice is often paired with a microtransaction, another frictionless process that allows users to play free-to-play games but purchase additional virtual items. Newer gaming platforms see revenue coming almost entirely from this new practice.”
It is, however, a complex onboarding process for a payments company when working with a gambling merchant, notes the Gaming Business Development Manager. There are many requirements for this, such as; “the director’s location, the structure of the company, and information available on the website the gambling companies need to adhere to so that they can be accepted as a new client and begin to process payments.
“These requirements are often a mix of scheme mandates from Visa and Mastercard; the payment processors’ own policies and rules and regulations set by the Gaming Authorities themselves. PCI DSS (the Payment Card Industry Data Security Standard) also plays a part in how a merchant will build their website and integrates payment processing in their checkout process.”
Jones also highlights the point that different payment provider solutions will be influenced by the countries an operator targets, with Germany just one example of this, where “gaming clients might prefer to use eps-Überweisung or Sofort rather than PayPal or other widely used cards,” while iDEAL is the preferred Dutch payment method.
“A smart payment system will also support gaming operators with dynamic routing and pricing tailored to each region to easily facilitate the connection to new acquirers and alternative payment systems,” she notes. “This step is very important when operators are looking to enter new markets and cater to their diverse user payment preferences.”
Paysafe’s Cutler adds to the debate by stating that payments have “always been integral to the player experience for iGaming.” He describes the “distinct payment cycle” that occurs in online gaming, where firstly, a player needs to make a payment to deposit and begin wagering, before needing to transact once more to withdraw their winnings as a payout. “For iGaming, there’s always been no play without pay – and that remains true in 2021.”
He continues by suggesting that the growth in influence of payments in iGaming as the industry as a whole has matured is unsurprising, given the crucial role payments currently play. The CEO explains that digital payments have diversified, with the emergence of new alternative payments methods (APMs) now offering players more choice over traditional methods like credit and debit cards.
One of the first APMs on the scene, explains Cutler, was digital wallets, a strong payment method for high-volume bettors who commonly frequent multiple iGaming brands. Quoting Paysafe’s 2020 research, he explains that “sports bettors wagering 7+ times a week favoured digital wallets (35%) over all other payment methods.”
Such APMs, he adds, “also offer players a literal alternative when faced with a card decline, which remains an issue in the US market, given the fragmented regulatory landscape. Digital wallets and online cash, or eCash, have served to fill this gap.”
Further referencing the company’s research - which was conducted this time last year - Cutler notes that “when faced with a card decline, over a third of players will use a digital wallet (35%) and 8% use eCash.”
One such payment method that has experienced significant growth in 2021 is cashless, which is an area that has undergone plenty of change - and a lot of digitisation.
This notion resonates particularly with Sightline Payments, who recently clinched the Payment Solution of the Year Award at the Global Gaming Awards Las Vegas 2021. The group’s Co-CEO Joe Pappano says cashless ecosystems provide consumers with “the same convenience they’ve come to expect in their everyday lives.” Taking a step back for a second, he notes that “you can buy groceries using a mobile wallet and stocks from an app on your phone, yet you still need to carry cash to fund your fun at the casino.” As one of the last remaining cash-based industries in our current economy, Pappano suggests it is “imperative” that the gaming industry modernises payments in order “to keep up with the demands of today’s digitally savvy consumer.”
The CEO continues: “Contactless payments create opportunities that cash simply cannot compete with. Digital solutions enable operators to revolutionise and personalise loyalty rewards by better understanding consumer behaviour on and off their properties. Mobile platforms remove friction from the patron experience by reducing the amount of time spent standing in lines at ATMs, kiosks, and cages.”
According to Pappano, reducing this reliance on cash lowers overhead costs to not only count, but store, transport, and acquire cash, thus optimising operator efficiency. Furthermore, digital payments “empower customers with robust responsible gaming tools that help them keep an eye on their accounts.”
Pappano then points to the pandemic as a key accelerator for the adoption of contactless payments in the gaming industry. Referencing recent research conducted by the American Gaming Association (AGA), asking previous year casino goers their interest level and intent to use contactless and digital payment options, he notes that 57% of respondents said cashless options were ‘very important’, with 54% ‘very likely’ to use such options. When focusing solely on Las Vegas, those figures increase to 64% and 63% respectively.
“When more than half of your customers are seeking to utilise this technology, it’s a good bet that casinos will show an urgency in adopting these new payment methods,” he concludes. On the GI Huddle in October, Global Payments President Christopher Justice reflected on cashless gaming’s growth in 2021. He suggests that operators across the US are now really embracing cashless as “the next new wave.” And that, according to Justice, can in one way or another be linked to the popularity of mobile phones. Today, he explains, “there are more people who have a smartphone than have running water around the world. People use their phones the majority of the time and as of last year, the mobile phone became the main screen for the majority of the population. It’s a solution whose time has come, and which folks have warmed up to, and that’s one of the things today’s on-demand consumer really wants.”
He notes that consumers are demanding such digital-first experiences, whether it be through applications like Amazon or Uber, and now that is being repeated in both iGaming and sports betting across the US.
“So cashless to me is a real gamechanger with numerous benefits for the operator and consumer alike,” continues Justice. “While 2021 - as we’ve seen from the gross gaming revenues being reported - has been the best year ever, cashless is one of those customer conveniences that will determine whose chair the consumer is going to sit in once the music has actually stopped.
“I liken it to pay-at-the-pump, where years ago none of the petroleum guys wanted to implement it because they’d make all of their profitability from their customers coming inside. But what they quickly realised was if they didn’t have pay-at-the-pump, consumers weren’t going to stop, and in fact the majority of Americans will drive to the next station if the pump doesn’t accept their card. I think the same thing is going to happen here with cashless in that it’s a solution that’s here to stay. It meets the expectations of the guest and it’s certainly going to help capture extraordinary market share for those early adopters who get in and provide that much more convenient way to play than their competitors.” Global Payments, notes Justice, is seeing this situation develop in the locations it has launched in over the last few years.
SECURITY IS CRUCIAL
While there is huge potential and subsequently huge excitement for payments companies in the gaming industry, there are, of course, other important factors to take into consideration when overseeing transactions. Security is a major factor.
It is a topic that AstroPay’s Lijtenstein hones in on when discussing online payments, saying it “is an issue that has gained massive attention recently due to increasing cases of online fraud. As the number of digital transactions processed daily continues to increase, security has become more prominent than ever.
“Using top-notch technology and IT security practices is a must in this industry, but it is far from being enough. In our experience, the main driver for safety and security is understanding the end customer as much as possible and fostering a bond of trust with them. Behavioural analytics aim at taking that bond to the next level, knowing the customer not only by the information they share or the usage they make of the service, but also based on fine-grained usage patterns such as recurrence, time of the day and special attributes.”
He continues: “Combined with adaptive security, services can toughen up and ask for extended authentication processes only to users who do not comply with normal usage patterns, which is a typical indicator of the identity-theft-family of scams.”
The CEO adds that applying such a strategy to enable smart fraud prevention is rapidly becoming commonplace in the gaming industry, and “is a key differentiator for payment services.”
Taking a more technical standpoint, Trust Payments’ Jones explains that there are a number of standards and practices gaming companies can follow when attempting to keep payments secure.
“Choosing the right payment provider is vital for gaming operators to thrive in this industry,” she tells Gambling Insider. “The right supplier needs to ensure that they are 3D Secure 2 (3DS2) ready and are PCI DSS level 1 to help reduce chargebacks and fraud and have the best level of protection for customer data. 3DS2 is an enhanced method of confirming customer identity by using fingerprint authentication, voice or face recognition, and behavioural biometrics.
“PCI DSS is the Payment Card Industry Data Security Standards – a set of global security standards that ensure every company that collects, processes, stores, or transmits cardholder data maintains a secure cardholder data environment. Complying with this standard is mandatory in every industry, so your payment gateway will need to be certified for PCI DSS.”
The Gaming Business Development Manager continues: “Moreover, beyond know-your-customer (KYC) identity verification processes, transaction monitoring for AML (anti-money laundering) is also an essential undertaking - it’s essential operators pick a payment gateway that can monitor transactions and fraud in real-time.”
WHAT DOES THE FUTURE HOLD?
So, all in all, a very exciting and very busy time for payments within the gaming industry, both land-based and online. But what happens next? What does the future - both short term and long term - have in store for the sector?
When Gambling Insider puts the question to Trustly’s Mallia, he replies by suggesting that innovation in payments is often freely bandied about, yet “rarely does it truly reflect the actual changes.” The continuous improvements in technology, he explains, alongside a constant need for better and more seamless payment methods, “means we are moving towards one direction, and we do not see it reverting.” The Gaming Accounts Team Manager is another to stress the role of the pandemic on the acceleration of this transition.
“Operators want to offer a more seamless experience with less friction which allows more time in allowing users to actually enjoy the product offering,” adds Mallia. “This is also aligned with users constantly choosing to use the quickest, safest and most enjoyable experience they can find. Payments are a very significant part of that.
“We can expect to see a further push when it comes to using payments not just as an enabler of transferring funds from one point to another, but also of being a provider of relevant data with features and products such as AIS, KYC data, affordability checks and other features gaining traction and feasibility thanks to the ongoing open banking push. These and other features will assist companies in making better choices and being more compliant in an ever increasingly regulated market while allowing them to do so without impeding their users’ experience, benefiting both the end users and the operators.”
Another trend that can be expected in the near future is the presence of more secure and mobile relevant authentication methods. According to Mallia, more banks will introduce more modern authentication methods, which will be more in line with the user requirements of today.
“With both the payments and gaming industries maturing and becoming increasingly competitive, innovation in payments will not just determine the way forward for payments, but also for the gaming industry itself by helping gaming companies achieve their aims,” he concludes.
Klatchko is another to touch on the future of the sector, with the Praxis Founder & Director focusing specifically on what lies ahead for high-risk payments in the online gaming industry. He immediately points to three things; localisation, innovation and a need for more solutions.
“Competition in traditional geo-targeting has long passed its boiling point,” he says. “This leaves little room for newcomers looking to sell traditional payment solutions in well-seasoned markets.
“On the other hand, local providers in emerging markets, from LatAm to MENA and South East Asia, are not managing to meet onboarding and volume demands. This opens up a niche for PSP aggregators who can relieve the burden of onboarding, while additional local solutions rise up to the challenge of providing e-wallets and local, instant banking solutions.”
In order to stay in the game, Klatchko explains that operators must provide staff with the “tools to execute amendments per region, payment method and player class, in real time.” He concludes by saying that operators, in order to stay competitive with affiliates and maximise other marketing activities, must also pay close attention to “approval ratios and settlement times over price sensitivity.” Any companies that don’t will be sure to pay the price.