From online lotteries to mobile sports apps, legal online gambling is becoming widely available in the US. But one critical part of the structure hasn’t kept pace with legalization: online gambling payment processing.
Since the dawn of legal online gambling in the US, payment processing has been an ongoing issue. The good news is what was once a crisis has softened to something of a nuisance, but it’s a nuisance, nonetheless.
Despite the industry’s best efforts (which you’ll find below), payment processing continues to be a thorn in the online gambling industry’s side. As PaySafe recently reported, the overwhelming majority of online gamblers experience payment processing difficulties.
A Brief History of US Online Gambling Payment Processing
Even with Legalization, Financial Institutions Remain Wary
Operators moved quickly to steer customers away from using often declined cards, but several years into its existence, credit card decline rates still hovered around 50%.
New Credit Card Codes Provide Some Relief
In addition to educating players, the industry worked with the credit card industry to institute new credit card codes for legal online gambling, which the industry did in 2015.
Unfortunately, even armed with the new codes, many financial institutions continued to decline online gambling transactions as an internal policy.
PayPal, Discover, and American Express Jump on Board
A few of the major players have softened their online gambling stance over the years, including PayPal, American Express, and Discover.
Michigan the Latest Market to Face Payment Processing Difficulties
Financial institutions are risk-averse by nature, and as CDC Gaming Reports recently reported, “The Michigan Legacy Credit Union has 20,000 members, many of them in low-income brackets. When CEO Carma Peters noticed that 1% of the credit union’s members made more than 1,200 transactions worth almost $83,000 in the first two weeks of legalized online gambling in the state, she decided to take action.”
And as CDC notes, Michigan Legacy Credit Union is far from alone in denying online gambling transactions. In an email response to Crain’s Detroit, Matt Barnhart, Comerica’s vice president of corporate communications, Michigan Market, said it is also prohibiting online gambling transactions. In the email, Barnhart stated, “Nevertheless, like most banks, we will continue to monitor the federal and state legal and compliance framework surrounding internet gambling for guidance how to safely provide banking services in that area.”
Several big banks are also no-go zones for online gambling in Michigan and beyond, including JPMorgan Chase, Capital One, and Citibank.
And the climate doesn’t seem to be improving.
Two Steps Forward and One Step Back
As Betting USA previously reported, in a 2020 research note, Jerry Rau, E&K’s Managing Director of Electronic Money Movement, wrote that on January 1, 2021, Visa will treat certain payment processors and general-purpose reloadable cards as if they were online gaming operators. That change effectively prohibits online gamblers from funding these alternative payment methods with their Visa cards.
Further, other states are flirting with regulations limiting depositing methods and amounts, which would only increase confusion (and likely force an even more conservative approach) for financial institutions trying to stay on the right side of regulations.