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Category: ONLINE GAMBLING

  • How to Successfully Get a Lottery Payment Gateway

    How to Successfully Get a Lottery Payment Gateway

    Lotteries, raffles, and competition websites where players can gain a massive ROI with a miniscule ante have an obvious appeal. Who doesn’t like getting free money? Following consumer demand are business owners and entrepreneurs like you who see the earnings potential on the business-side of lotteries.

    Getting your site set up with a lottery payment gateway that works where it’s supposed to (more on that down below) is the most difficult part of creating a functional business in this industry. We’ll make it as easy as possible by outlining some points for you to consider before submitting lottery merchant account applications and guiding you towards successful approval.

    Lotteries are NOT the Same as Gambling

    Lotteries and sweepstakes are not the same thing as gambling or casino games. We like to group all of these together under the same umbrella, but they are treated differently by banks and laws.

    What is a sweepstakes?

    What sets sweepstakes apart from casino games or gambling is that it can be entered for free. If you want to offer sweepstakes to site visitors, you must provide the option of entering for free. Usually, the stipulation is that free entries must be physically mailed in, which usually deters people from doing it. This is the greatest differentiator between the two and can ultimately be the deciding factor in whether a payment processor shuts you down or not.

    For sweepstakes, participants will place their stake (essentially, a bet—unless they enter for free) and the winner will “sweep the stakes”, taking the entire amount of money staked. There are variations of sweepstakes where entries can be completely free, and no formal payment needs to be made to create the winning amount. Things like shopping sprees or winning a free phone can be the prize for a sweepstakes.

    You’re more likely interested in the lottery portion, not the sweepstakes criteria. Sweepstakes are used more as an incentive to make purchases, not really as an entire business model.

    What is a lottery pool business and how do lotteries differ from gambling?

    Lotteries are games in which tickets are sold in the hopes of gaining a prize, usually monetary. This differs from gambling in that the risk is a bit lower—but still there and still high. Gambling runs on high-risk stakes, betting any amount with the odds stacked against the player with the purpose of gaining exponentially more back. But that risk for gambling goes both ways: if the player does win, then the house has to pay up, respecting the game’s rules. For lotteries, the rules are much stricter. Usually tickets are a set price, players can buy multiple tickets if they want, and the amount they win depends on how many tickets other players buy. Once a player wins, they do get paid minus fees and taxes, so there’s always something left over for the business.

    Lotteries and sweepstakes are still high-risk businesses and will require a high-risk merchant account to function properly.

    How do lotteries differ between states?

    Not every state in the US offers a lottery, and some states even offer joint lotteries where players can buy tickets in another state and win. However, this is limited to retail stores. Online lotteries are an entirely different story, and only 8 states offer online lottery ticket sales: Michigan, Pennsylvania, Georgia, Illinois, Kentucky, New Hampshire, North Carolina, and Virginia.

    Some states don’t offer their own for religious reasons, others do it because they don’t want competition for successful casinos operating there. So how does this affect you? Each state has their own rules for lottery businesses. You’ll need to make sure you understand each state’s lottery laws and gambling laws to some extent. This helps you keep your business clean and operating only where it should.

    For example, Alabama prohibits the formation of a state lottery, gambling, and casino games except for on some Native American territory. In this case, it’s best not to operate a lottery site in this state due to how strict its rules are. You can use the link above to search for more state lottery laws and gambling laws. Familiarize yourself with the gist of them to get a clearer idea of where you should focus your business operations.

    More and more states are opening up their rules for online lottery sales along with e-commerce gaming and gambling operators. It’s also important to know that international lottery sites can potentially sell in all 50 states. Opening up shop in Malta is a great way to get your foot in the door and operate internationally, including running your site in the states and gaining a multi-currency payment gateway.

    The Challenges You Can Expect to Face When Getting a Lottery Merchant Account

    Not all merchant service providers will offer accounts for lottery businesses. Merchant accounts for lottery sales are wrapped up into igaming accounts because lotteries and sweepstakes are offered in addition to casino games, usually. That’s one challenge you might face if you are attempting to only offer lottery tickets to customers. The solution might be to keep your business model clear and strictly outline your operations for the acquiring bank, otherwise they might assume your business is a higher risk.

    Get your company licensed

    The first step no matter what is to get your company licensed. Merchant accounts are broken down into two categories: coded and non-coded. Only licensed gaming businesses can have coded merchant accounts, and that Merchant Category Code (MCC) is 7995. Feel free to do a little research of your own about that code to improve your account expectations and negotiations with your online payment gateway provider.

    Secure as many payment methods as possible

    The more ways for players to pay, the better your business will be. The most common type of payment is through credit cards (though regulations, at least in Europe, are changing that towards debit and bank transfers). Merchant account providers are also more willing to provide credit card processing that debit card processing.

    If you are assigned an MCC of 7995, then you won’t be able to process debit cards for the most part. Many banks deny transactions with that code because of the risk associated with it. That doesn’t mean that all banks deny it, but many do. Depending on your business, you could argue your way into falling under MCC 7800, which is for government-run online lotteries.

    Having said that, you should still offer Visa and Mastercard debit card payments as a method for your site. In fact, debit cards are more secure because it relies on actual funds. This pay be a point to assert when negotiating with acquiring banks.

    Ensure your lottery merchant account is OCT-enabled

    OCT stands for Original Credit Transaction and allows merchants to send funds directly to a player’s preferred credit or debit card payment option. It allows for PCI-compliant direct money transfers without the need for a user’s sensitive bank account info.

    Payments can be made via ACH or mailing a check, as well. ACH is more secure than sending a check, making wire transfers, or credit/debit payments. They can also be much faster. The difference comes down to what your account offers as a payout option and what the customer prefers if given the option. Note that ACH is only available in the US.

    You need a debit and credit merchant account

    Most providers only allow credit in the amount a customer spends, meaning you need to pay out via the debit account. Lotteries are high-risk to banks because of the potential for loss. They way in which these banks and processors combat that risk is forcing you to pay out with money that you actually have. You do have some credit, though. For example, if a customer spends $10 and wins $1000, the bank isn’t going to want to loan you the remaining $990 so you can pay the customer. They want you to take care of that on your own. That’s what the debit account is for.

    What to Look for in a High-Risk Merchant Account Provider

    In addition to the above, you should use a payment processing solutions provider that offers protection against chargebacks and fraud. Security is one of the most important aspects of operating a high-risk business, both for you as the online business owner and for the bank processing your transactions. Ensure you have protection against betting fraud, friendly fraud, and chargebacks as well as secure payouts and incoming payment processing. High volume caps are another point to negotiate. With a lot of incoming traffic, you want to make sure your account can handle it all without faltering.

    To get help setting up your lottery merchant account, get in touch with our agents who specialize in your industry. We’ll get you set up securely and fully operational quickly with customizable APIs for your lottery pool merchant account.

  • Online Gambling Merchant Accounts: Win The Payment Processing Game

    Online Gambling Merchant Accounts: Win The Payment Processing Game

    In the last few months demand for online gambling merchant accounts has risen. Obviously, due to COVID-19 people were starved of their usual forms of gambling entertainment. So of course, demand for online casinos boomed and continues to do so. Hence the demand for payment processing.

    Some internet users became more frugal during the lockdown. Others with money to spare took their chances with online gambling. Some lotteries closed with people unable to buy tickets. Brick-and-mortar casinos also closed their doors under government shutdowns. For many, online casinos provided the solution.

    Today, online searches for online gambling is still high in many countries. With the average transaction rates across Europe coming in at £65 ($85, €75) this is a very lucrative industry for those who get it right. However, online gaming and gambling are high-risk verticals. They are subject to increasingly strict regulations. Securing payment processing is not always easy either. This post will set out what’s happening in the industry at this moment in time and how to get your payment strategy set for success.

     

    The pandemic drove demand for virtual casinos and online gambling merchant accounts

    Many industries continue to suffer from the global pandemic. It has had an effect on gambling coupled with pausing of sports activities and some national lotteries. But online casinos have actually stood out. They’ve lapped up demand that in-person gambling premises were unable to satisfy.

    In fact, COVID is set to put the online gaming and gambling industry into overdrive. The global online gambling market is expected to grow from $58.9 billion in 2019 and to $66.7 billion in 2020 at a growth rate of 13.2%. The growth is mainly attributed to restrictions from COVID-19.

    Many populations continue to be routinely confined to their homes. The vast majority of them also have more free time with which they can pursue leisure activities including online gambling. The market is then expected to reach $92.9 billion in 2023 at CAGR of 11.64%.

    Many have turned their attention to skilled gaming, such as online poker. There’s been a recent surge in the number of online poker players during COVID. For the best players that means more money, more often. Many online casinos are offering record prize pots for poker tournaments. With record entry fees supporting those prize purses.

    Thus, it’s a great time to be an online casino operator. But strict regulations and payments have always been hurdles to raking in revenues. So how can you navigate the payments world to ensure you’re winning with house money?

    Are you and online gambling merchant looking to diversify after losing many of your key sports for betting? Why not take a look at how you can pivot to e-sports during the COVID crisis?

     

    Credit cards still lead the way for growing online casinos

    The challenge has always been how to succeed in a high-risk merchant category. There are tight regulations, and casino payment gateways are difficult to obtain. The hardest part for online casinos is obtaining online gambling merchant accounts for credit card processing. Sales via Visa and Mastercard still lead the way for online gambling purchases, particularly in Europe.

    Last year, the residents of Spain (36%), France (52%), Belgium (47%) and the UK (49%) were leaders in using credit cards for online gambling transactions. But other payment methods have increased in popularity spurred by high-risk gateways that don’t accept credit cards. For example, e-wallets (such as Skrill or Neteller) are taking an increasing share of the leading European markets. With 45% penetration in Italy, 35% in France, 40% in the UK, 32% in Germany.

    Some online casinos have struggled to secure a high-risk merchant account. Many have turned to gift cards, e-checks, and voucher systems. But this is not ideal. As you already know, online gambling works on a basis of deposits and withdrawals. Customers will not be happy having their winnings mailed out as a check or a voucher. They want fast withdrawals to their accounts as cash. Which is why e-wallets are continuing to rise in popularity.

    However, some online gaming merchants are turning to payment aggregators such as PayPal to handle their payment processing. But payment facilitators present a huge risk to your online business. Payment aggregators have much lower risk tolerances. Online gambling is prohibited on many popular third-party payment platforms. Often freezing or withholding funds without warning.

    Thus, your focus should always be on obtaining credit and debit card processing. An online gambling merchant account is your best option. That way your online gaming or casino operation can continue to grow and scale.

     

    Utilize the latest anti-fraud and chargeback tools to protect your processing

    Regulations on online casinos are different right across the world. Most online casinos in Europe are Malta-based. Malta has friendly iGaming and gambling regulations set by the Malta Gaming Authority. If you haven’t already, you may want to secure a Maltese base. Set up a local office and director to establish an online presence, payment processing, and regulatory approval across the EU for:

    • Peer-to-peer games such as poker or bingo
    • Online casinos including slots
    • Online lotteries
    • Fixed-odds betting, including sports events
    • Fantasy sports

    But no matter your regulation jurisdiction, demand will always be high. But poorly-managed high volumes of payments can result in deadly chargebacks. In today’s market, there’s no excuse for high-risk merchants not taking advantage of machine-learning technology to battle fraudulent transactions and chargebacks. Providers such as Feedzai, Ethoca and Verifi are all anti-fraud solutions that take advantage of machine-learning tech. Helping you to battle both fraud and chargebacks. Speak to the bank that issued your merchant account or payment service provider to see if you can secure access and protect your revenues.

    Don’t forget that regulation requirements surrounding electronic Know Your Customer (eKYC) checks are also fantastic for uncovering fraudsters. These checks force your customers to provide extensive documentation such as proof of address and source of funds. By requesting such documentation, you can single out fraudsters from real customers much easier.

     

    How to secure a payment gateway for your skill and online gambling operations?

    Securing credit card processing in the online gaming industry is difficult. However, if you manage to get approved for an online gambling merchant account, you’ve potentially won the jackpot. Already in Europe, the UK gambling commission banned credit card processing during the pandemic. This a decision that could soon spread to the rest of the EU. So now is the time to secure credit card payment processing for your gaming operations before it’s too late. With a legal and compliant structure, there are providers willing to support your business model.

    What steps will you take to secure a high-risk merchant account? As with any business vertical, prior processing history is vital. The longer you can prove you have acceptable levels of refunds and chargebacks, the better. Also, proving that you’ve managed to scale without the help of credit and debit card processing will impress those in charge of your application.

    Next, you may want to consider an offshore location for future online gambling merchant accounts. Other territories often have less stringent merchant account requirements than your home country. As we mentioned above, Malta is an excellent location to set up a local office (with a resident director) to secure an offshore merchant account.

    In this industry, proof of at least 100 000 euros in monthly revenue is needed to offset the huge risk that acquirers associate with your business. Lastly, this is one of the most tightly-regulated industries on the planet. Which means you need a crystal-clear ownership structure, provable sources of capital, and identifying documentation for all employees.

     

    Ride the COVID-inspired wave of demand with better payment processing

    This is undoubtedly a boom time for online casino and online gaming merchants. However, this industry is highly regulated. It can be extremely challenging to secure payment processing via a merchant account in this vertical. But get it right, and you could soon be relaxing as the money starts rolling in.

    To make this dream turn into a reality you’ll likely need the help of an experienced partner.

    In the last decade, DirectPayNet has helped online gambling merchants secure all-important credit and debit card processing. Often when all other payment service providers have failed.

    Is your online growth stifled by payment processing roadblocks? Speak to our expert team today. Discover how we can secure better payment processing for your online casino operation.