Frictionless Online Gambling Payments Now Common as Financial Institutions’ Anxieties Wane

In a dramatic shift from the attitudes that prevailed during the early days of US online gambling, American banks have warmed to legal online casinos and sportsbooks—and that’s good news for online gamblers. Payment providers like Paysafe and PayNearMe now have deals in place with major banks allowing users to connect their accounts and move money back and forth at will.

When US federal authorities cracked down on unregulated online gambling nearly 20 years ago, they did so in part by targeting the third parties facilitating the transactions. Under the Unlawful Internet Gambling Enforcement Act of 2006, financial institutions became legally liable if customers used their products to move money to offshore gambling sites.

One consequence of that was that financial institutions remained wary of online gambling even once it became legal and regulated. For a time, it was a common frustration for online gamblers to have perfectly legitimate payments declined due to this skepticism.

Fortunately, that’s becoming rarer. Today’s US online casino players enjoy more banking choices and less financial friction. For operators, that increased ease helps attract and retain online customers.

Banking Friction Blocks Early Online Gambling Growth

The regulated online gambling industry in the US recently entered its second decade. A lot has changed in ten years. Single-click solutions like Paysafe’s newly-launched Pay by Bank would have seemed unacceptably risky to financial institutions in those early days.

Despite serious hype and billion-dollar revenue expectations, New Jersey ended its first year of legal online casinos in late 2014 with underwhelming results. At the time, a report from AP News partly blamed early issues with geolocation accuracy for the lower-than-expected revenues.

However, the banking industry may have significantly contributed to New Jersey online casinos’ subpar performance.

AP’s Wayne Parry wrote in November 2014:

A more serious problem is the continuing reluctance of many banks to process Internet gambling credit card transactions, even though the U.S. Justice Department has declared Internet gambling legal as long as it is done within a single state and does not involve bets on sporting events. That has left automated bank transfers as the main way players fund accounts. New Jersey authorities have met with many credit card companies and banks to tout their strict regulations and oversight of the industry but have failed to change many minds.

While New Jersey soon sorted the geolocation issues, bankers would take longer to get comfortable with online gambling payments.

However, a recent Paysafe report highlights how much has changed in the ensuing decade. Although the report focuses on online sportsbooks, its findings can generally apply to online gambling.

Online Gamblers Want Financial Choice

In its report, Paysafe found that while debit cards still dominate several global markets, a rise in alternative payment methods (APMs) challenges that dominance. The report noted digital wallets and e-cash as particularly popular, along with credit cards in jurisdictions that allow credit-funded gambling.

Beyond the specifics, Paysafe said the main takeaway is players desire payment choices.

Paysafe noted that players prioritize a balance of speed and financial security and display “high loyalty” towards brands that do this right. Further, according to the report, payments are “crucial” to starting and sustaining customer relationships, and there’s no room for complacency.

From the report:

Streamlined payouts continue to trump all other factors (brand trust, odds, promotions, user experience, and sponsorships/brand ambassadors) when players choose where to wager, especially in Germany, Italy, and across North America. With rapid deposits and payment method availability also high in player priorities when selecting a book, the value for operators of optimizing their payment stack is clear, especially given the high ROI of payments.

From the outside, the expanded payment options available at US online casinos and sportsbooks indicate banks are becoming more comfortable with online gambling.

Another example of that evolution is a recent deal between payment provider PayNearMe and Trustly, a leader in open banking technology.

Open Banking Changing Online Payment Landscape

According to Investopedia, open banking allows third-party financial providers access to consumer banking data via application programming interfaces (APIs). The innovation enables financial services customers to share personal financial data online securely.

Per the PayNearMe/Trustly deal announcement, the new partnership improves bank deposits and withdrawals on PayNearMe’s MoneyLine platform. Under the deal, PayNearMe clients can accept guaranteed ACH (bank-to-bank) deposits and instantly transfer winnings into player bank accounts. Cash, cards, and mobile options like Apple Pay, PayPal, and Venmo are also available through the integration.

In an email to PlayUSA, PayNearMe EVP Michael Kaplan highlighted the new partnership’s importance for online players and operators alike.

PayNearMe’s partnership with Trustly is significant for online casino players because it allows them to make deposits from their bank account — in real-time — without the hassle of entering their account or routing number. This provides players with a fast, reliable deposit method while reducing risk and providing guaranteed funds for operators.

Notably, MoneyLine is available in all seven US online casino markets, and PayNearMe already has several online casino partners, including BetMGM, Caesars, DraftKings, and FanDuel. Further, Mohegan Sun, Tipico, Bet Rivers, and more round out PayNearMe’s US customer list. Trustly, for its part, reports relationships with more than 12,000 banks worldwide.

Indeed, the above would not have been possible a mere decade ago when banks were more reluctant to evolve. Kaplan says the partners plan to expand the deal as industry demands for open baking solutions grow.

There is a clear move toward open banking and we recognize the immense value it brings to our clients. We plan to expand our partnership with Trustly to incorporate additional open banking capabilities into our platform and enable all of our clients to benefit from this innovative technology.

About the Author

Robyn McNeil

Robyn McNeil

Robyn McNeil (she/they) is a Nova Scotia-based writer and editor, and a lead writer at Bonus. Here she focuses on news relevant to online casinos, while specializing in responsible gambling coverage, legislative developments, gambling regulations, and industry-related legal fights.
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