The role of payment processors in online casinos
Once you’ve gone through all the trouble of setting up an online casino, putting together the funds, and walking that tightrope of state regulation, it’s time to accept that tantalizing cash players are happy to fork over and make it as hassle-free as you can. That’s easier said than done though when it comes to online gambling. First of all, with cyber criminals and money laundering, you are a prime target. So not all payment processors are going to work with you or maybe on a limited basis, while imposing their own terms.
You’ll also probably have a highly international audience, which means you’ll need to connect to more and more regional processors. That will not be a problem though, as today we will cover operational efficiency, customer satisfaction, regulatory compliance, and the best payment processors for online games casinos.
How payment processors work
These outfits act as intermediaries so you can transact promptly with your users with iron-clad security. A payment processor is a provider of technology. What they do is handle transactions for you – from authorization to processing to settlement. When a customer makes a purchase, it’s the payment processor’s job to ensure that the payment is securely transmitted, the funds are transferred, and all parties involved comply with financial regulations.
Here are the steps of the payment processing cycle.
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The customer fills out the deposit or withdrawal form using their relevant details and hits enter.
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The payment processor sends the transaction request to the issuing bank to verify the payment method, which then checks if the player has sufficient funds or credit before checking on whether it’s really them.
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The payment processor then relays the authorization code to the casino’s payment gateway, as a declaration of approval. The merchant proceeds with the transaction.
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The payment processor ensures that the funds are transferred to the merchant’s account.
Full-service processors like Paysafe and Paypal handle all aspects of payment processing from transaction authorization to settlement and fraud protection. Then there are other types which are merchant account providers like PayCly and Skrill. These, instead, just set up and manage merchant accounts for businesses to receive funds from payment transactions.
Processors and online casinos specifically are a major source of funding for sports teams, featured right on the front of their jerseys and the sleeves. Skrill last year became a tour partner of Chelsea FC football club.
Security measures
There are several layers of data security that payment processors employ:
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Encryption: to protect data, ensuring that details like credit card numbers are securely transmitted;
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Tokenization: replaces payment data with a unique identifier (token);
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Fraud detection: algorithms and machine learning to detect suspicious activity;
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PCI-DSS compliance.
Issues that hamper iGaming payments to account for
The iGaming industry is unique among online businesses when it comes to handling payment processing because of the cornucopia of risks and demanding regulations governments impose. This renders them rife with operational hiccups.
Here are some of the primary causes.
Rigorous regulatory compliance and licensing processes
The list of iGaming requirements are quite extensive and vary considerably by jurisdiction. This is because different legislatures take different moral approaches to gambling and have different ideas for how to best regulate it. These laws change a lot and are often quite vague, which means they have to be followed constantly and in detail.
Chargebacks and fraud
“Friendly chargebacks” is one of the most common types of frauds and consumers often claim that a transaction was invalid. When they do so, the money is returned back to the customer until the vendor can prove otherwise, and even then they very often don’t get the money back.
Then, of course, there are nefarious individuals who claim they were improperly charged to steal money without ever having dealt with the casino. This necessitates advanced fraud detection software which is quite expensive, cumbersome, and complex to integrate but worth it.
Payment processors limitations
Some processors and gateways are against dealing with online casinos altogether, such as Stripe and Square, since they deem them a high-risk industry. When many of them do deal with online casinos, they can charge higher transaction fees and impose more stringent underwriting criteria. So iGaming operators have fewer options to choose from and less bargaining power.
Transaction inefficiencies
Delays are common, often due to complexities due to the need for robust compliance, regulatory reporting, and fraud prevention. This sometimes causes downtime and integration errors.
International hurdles
Online casinos must support a large number of currencies and currency conversion fees and fluctuating exchange rates can eat into profits.
Important priorities in choosing a payment processor
To outperform the competition, an iGaming operator must render their process easy as can be for people to deposit and withdraw money. That means a variety of payment options. A lot of people prefer to use just their Visa or Mastercard.
Here are some essential things to connect:
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fraud prevention systems: you will be barraged by fraud attempts, so this is well worth the cost and not optional;
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chargeback handling software: you will immediately gain back more money by having automated fraud replies and the burden of proof lies on you, not the complaint filer;
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e-wallets: online wallets allow money to be transferred to it and then withdrawn to a wide range of local user payment accounts;
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prepaid cards: this appeals to many people as it instills an automatic limit from the get-go. On top of that, they have privacy since their names aren’t tied to it;
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Mobile payments: these are quick and convenient as people don’t have to take out their card or worry about losing it;
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Monthly billing software: if you’re planning to put your users on a subscription.
Best payment processors
Below are some of the top options currently dominating online gambling, each featuring their own strengths and weaknesses and, very importantly – provide inroads into different regional markets.
Skrill
This is one of the most widely recognized e-wallets in online gambling with over 20 million users and support for more than 25 currencies. It’s a non-brainer for iGaming operators looking for a quick, global reach and is especially useful for smaller or newcomers looking for an affordable solution.
EcoPayz
They specialize in online gambling with a flexible mix of payment options, including e-wallets, direct bank transfers, and prepaid cards. Its standout feature is a strong presence in high-growth markets like Latin America, Asia, and Africa, thanks to localized payment support.
The platform is API-friendly, mobile-optimized, and offers multilingual support. With funding limits of up to 10,000 dollars a month, it works out well for those entertaining VIP players and scaling into emerging regions.
PayCly
This one is a fully licensed payment institution built to support heavily regulated industries like iGaming. It offers card processing, e-wallets, and numerous local payment options.
What makes PayCly special though is its deep customization and integration support across mobile, web, and app platforms in addition to rich analytics and reporting tools. It opens up a lot of territories in Europe and Asia.
PayPal
Though it officially restricts gambling transactions, there are still some offshore platforms utilizing it. Its global scale is unmatched with a whopping 300 million users. Its major advantages are instant trust, ease of use, and popularity. It can be risky though due to strict compliance rules, chargebacks, and potential account freezes. It’s not ideal for the most regulated operators like Europe and US states.
Other good suggestions to consider are:
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Boku
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AstroPay
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Mercuryo
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Optimal Payments
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QIWI
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Trustly
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Paytm
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