Fantasy Sports - How Diversified Is Your Payment Processing?

Fantasy Sports Merchant Accounts – How Diversified Is Your Payment Processing?

How prepared are you for the business of fantasy sports in 2019?

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Fantasy sports have come a long way from office betting pools. Now, it’s a US $7 billion industry with a huge fanbase. It has consistently expanded its offerings catering to fans in football, basketball, soccer, golf, and other sports like MMA and NASCAR.

But, as a billion-dollar industry, is it now too saturated? And what do the various legislations mean for your business? Plus, as a high-risk business unlike others, what concerns should you have for payment processing?

These are a few of the issues we’ll be looking at in the business of fantasy sports and the impact of online sports betting.

 

Fantasy Sports – the billion-dollar industry

According to the Fantasy Sports & Gaming Association (FSGA), there are close to “60 million fantasy sports players” in the USA and Canada. (The FSGA was formerly the Fantasy Sports Trade Association (FSTA)). This growth in players has undoubtedly helped to increase the revenues of fantasy sports companies. But it has also fuelled the rise in fantasy sports companies to the point of saturation. Now, there are also the opportunities for pairing online gambling with fantasy sports locally in the US where before it was relegated to offshore sites.

 

Are online sports betting legal?

The legitimization of sports betting has certainly helped to spur the growth of online betting and even fantasy sports sites. In May 2018, the US Supreme Court overturned a 25-year old federal law (Professional and Amateur Sports Protection Act). The Supreme Court Ruling basically allow all states to authorize sports betting as they see fit. With this ruling, American betting companies are now able to compete legally in various types of sports betting.

Fantasy sports sites are also poised to take advantage of this newly legal online gambling market. They have either indicated interest or have started offering online betting as part of their service to users. However, while fantasy sports may be legal in other international jurisdictions, online betting is either illegal or heavily regulated.

 

How global is the fantasy sports market?

Outside of the USA and Europe, India has a large market for online fantasy sports – in cricket. Not a sport familiar to most Americans, but it does well in that part of the Asian continent. And like America, the fantasy sports industry gained legitimization from a local court ruling. In India, it was ruled that playing fantasy games online was not betting, and therefore not subject to gambling regulations.

Similar to India, there are many more markets internationally for fantasy sports to tap. And this means learning the intricacies of the sports that do well in those markets – like cricket in India. The larger players in the American market are aware of this and are looking to or have already expanded internationally.

In Japan, baseball and basketball are the big draws for fantasy sports with American football and hockey coming in close behind. In Europe it’s soccer or better known as football locally. Plus, there are also large fantasy sports markets in Central and South America, China, and Southeast Asia.

Expanding to new markets mean understanding them and getting the correct licensing in order to be able to compete in them legally. So, in addition to the types of sports that do well, you also have to look at the payment options preferred by your users and market.

 

How diversified are your payment platforms?

The more established fantasy sports companies offer a variety of payment methods for their users from credit cards to ACH, PayPal transfers, etc. The variety of payment options increases confidence in consumers and thereby market share.

As a smaller or start-up fantasy sports company, it’s important to show your customers that you’re a safe bet for their funds too. However, given the financial and reputational risks associated with this industry from payment providers, it can be difficult not just to get a merchant account, but also to diversify payment processes. But, diversification is necessary to capture the ever-increasing – and strongly competitive – market in which your business is operating.

Now, there is also the added requirement for mobile processing. With high internet access via mobile devices, it’s a no-brainer to accommodate your mobile users with a friendly checkout process made for smaller screens. This attracts and engages more clients, and expands your market.

 

Where do Bitcoin and other cryptocurrencies fit in?

Cryptocurrencies seem like a natural fit to fantasy sports and online sports betting. The ability to access and transfer money around the globe via blockchain technology has increased the use of this method of payment. This has fuelled the rise in combining blockchain technology and fantasy sports leagues.

So, in addition to options to pay using Bitcoin and other cryptocurrencies, crypto buffs are also launching digital fantasy games linked to various cryptocurrencies.
With cryptocurrencies, players have the option of a liquid form of tender. They also offer faster withdrawals to their wallets and processing that can take place quickly. So, your traditional payment methods have to complement this area.

 

An industry unlike any other

Like sports betting and gaming merchant accounts, processing for fantasy sports are considered high-risk. That’s because the nature of the fantasy sports industry ensures it’s always placed in the high-risk category no matter the payment processor.

As such, it can be difficult to get approved for a merchant account for a high-risk business. Now while you can get by with a service like PayPal in the early stages, as you grow and start doing more business, you need a more robust solution that will allow your business to scale.

With the increasing use of mobile devices, you also need to simplify your checkout process to allow for faster checkouts. This is in addition to having highly secure onboarding processes as well as follow Know-Your-Client (KYC) rules that will protect your customers and your business. It’s about balancing security with a seamless onboarding process. You need one that is highly secure and limits fraud while not turning away potential customers.

Therefore, compliance and risk management are crucial aspects of managing your online fantasy sports site. The risk of chargebacks is high in the industry. So too is fraud. Because of the high-risk nature of fantasy sports and online betting, and the difficulty in securing merchant accounts, some companies specialize in merchant accounts for high-risk businesses. Unfortunately, too many of them are out to gouge businesses with high fees and untenable contract terms.

 

Reducing global payment friction to increase revenues

The aim of the fantasy sports business is to make it easy for players to pay and get paid quickly. As companies expand into global markets, the method of payment becomes an issue. Like players, you’ll have to determine which payment method would work best in the markets you want to enter. This is truly a situation where one size cannot fit all.

When you can offer the preferred payment method of the local fans, then that increases your legitimacy and consumer base. Your business must know how and when to provide alternative payment options and localized payment tools. As such, a payment solutions provider can help you to:

  • Diversify your customers’ payment channels; and
  • Identify suitable payment options based on market

For example, DirectPayNet helps fantasy sports and online betting companies identify the right payment options per market and assist with acquiring merchant accounts and /or ACH solutions in these markets.

 

What are you doing to diversify your market and payment options?

The fantasy sports markets continue to expand, and online sports betting is becoming more mainstream. Earning potential is increasing, but only for participants who are equipped to take advantage.

Compared to other high-risk merchant categories fantasy sports is a vastly different business model. So too is finding merchant accounts and/or ACH processing at attractive rates. The more ways that players can pay you, the more your business will grow in revenue. Plus, as a high-risk business, having multiple payment channels allow you to protect your cash flow and mitigate risk should one of your providers change the industries they support.

Contact DirectPayNet and to help diversify your payment channels (be it credit card or ACH processing), reduce fraud and get chargebacks under control.

About the author

As President of DirectPayNet, I make it my mission to help merchants find the best payment solutions for their online business, especially if they are categorized as high-risk merchants. I help setup localized payments modes and have tons of other tricks to increase sales! Prior to starting DirectPayNet, I was a Director at MANSEF Inc. (now known as MindGeek), where I led a team dedicated to managing merchant accounts for hundreds of product lines as well as customer service and secondary revenue sources. I am an avid traveler, conference speaker and love to attend any event that allows me to learn about technology. I am fascinated by anything related to digital currency especially Bitcoin and the Blockchain.


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