Despite its popularity and its money-making potential, most traditional financial institutions tend to refuse gambling merchant accounts. The industry’s background and history, as well as excessive chargeback ratios keep banks from approving gambling merchant accounts. Navigating regulations are the biggest challenge faced by the industry, especially with new regulations for online gambling being put in place. Gambling businesses gain to benefit from the expertise of specialized payment service providers.
Payment providers in the gambling industry often must deal with complaints, fraud and chargebacks. This entails costs for the providers as well as the traders. Moreover, numerous local laws and various legal approaches make the provision of a payment service more difficult.
In order to control risks, keep costs low and comply with the administration and standards, gambling businesses should select their payment providers very carefully and also be constantly on the lookout for optimizations.
The online banking system Neteller is popular in the gambling business. It offers support for all currencies and is available in 160 countries of the world. optile, a company from Munich, is a PSP that offers advice on payment solutions in gambling.
Payment providers classify certain industries branches as being high-risk. Online gambling is generally qualified as high-risk. The criteria used to classify merchants are usually the industry type and the history of disputes and chargebacks.
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High-risk merchants are generally more susceptible to fraud, insolvency or other liabilities, or connected to an elevated risk of financial loss when underwriting those businesses.
Applying for a merchant account is always implies a lot paperwork and verifications. However, processors and Acquirers will proceed to a more careful evaluation of high-risk merchants.
Some or all of the following corporate documents and business information might be requested: certificate of incorporation, memorandum of association, beneficial owner ID (preferably a passport) and proof of residence. When applicable, a business license might be required. To facilitate the application process, the provided information should be accurate.
A trustworthy business model can help minimize fraud and chargebacks. Full disclosure of the services and charges is an important criterion to get a merchant account. The order process should include the terms and conditions of a promotion, as well as a clear cancellation policy, including the steps to cancel payment after a trial period or recurring transactions. Trial period should clearly disclose their length and that the customer will start being charged, if not cancel prior to the end of the trial. The date to which payments will begin should also be clearly stated.
Previous credit card processing history can help convince acquirer or processors to onboard a high-risk merchant. It can prove that the applicant is an established and dependable merchant, with good monthly sales volumes, few chargebacks and few refunds.
Visa define, in the Global Brand Protection Program (GBPP) Guide, clear categories of high risk businesses. The merchant category codes (MCC) for high-risk merchants in the gambling industry are 7995, for gambling, betting and casino (incl. lottery, wagers, casino and off-track betting), and 9754, for non-face-to-face gambling, betting and casino.
In recent years, the German federal states have banned over 100 foreign poker and casino offers on Internet. Further prohibition procedures are running - the payment traffic to foreign suppliers is also to be blocked. The goal is to protect the game against counterfeiting. More than seven million consumers use online gambling services in the EU. Countries like Malta and Gibraltar have given licenses to hundreds of online vendors that offer their services without the necessary national concession and ignore national bans. These illegal offers make up a large part of the online gambling market in many countries.
In their fight against illegal online gambling, some european governments are introducing payment blocking into their legislation, as gambling regulation reforms.
Estonia, Hungary, Belgium and Latvia have blacklists and a ban on payment in their gambling regulations. Spain, Poland and France do not use blacklists for payment blocking purposes. The Netherlands, which is currently working on a new gambling regulation, also intends to introduce blacklists to be used for the payment block (as well as for the controversial blocking of websites). The German gambling regulations give provisions for payment block, however lacking precise information on how it should be implemented. Accordingly, it is currently unclear whether German regulators are required to suspend individual payment transactions identified in connection with illegal gambling activities. Apart from data protection issues, the blacklisting or whitelisting approach would be foreign to German administrative law.
There are three possible payment barrier enforcement approaches: whitelisting, blacklisting and blocking of individual payment transactions that have been identified to track the money.
In order to identify a transaction associated with illegal gambling, and for the payment block to work effectively, the following data is required:
Payment blocking politics attract a lot of criticism, seen by some as unlawful enforcement tool which is not implementable in practice. Legal issues with data protection laws are also raising red flags, notably considering that the mass monitoring of customer data by PSPs would be necessary to execute payment blocking.
Meanwhile, there is enough competition in the payment provider industry to eliminate all doubts about the lack of support for online casinos. In addition, countries with very restrictive access to gambling have become increasingly liberal. At the moment it looks as though the imaginary chains are being taken away from online payment providers in the near future and the market is gaining in attractiveness. Online casinos are constantly trying to find cheaper and faster payment methods as well as to make the payment process easier and safer for customers.
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