Over the last decade, technology has transformed the online gambling landscape and we continue to see more initiatives focused on customer retention. As a result, operators now offer more betting combinations and options than ever before to keep customers engaged.
Speed is of the essence. Mobile continues to grow as the channel of choice and is predicted to be worth $100 bn by 2021 (source: Global Games Markets). Meanwhile, players’ thirst for speed and frictionless experiences has also led to the demand for greater payment choice.
CHRIS SMART is SVP gaming and fx markets at eMerchantPay. He is a gaming and FX subject matter expert who partners with operators to increase their online conversions and optimise their payment efficiencies. Chris has spent nearly a decade working closely with some of the world’s leading gaming and forex brands, helping them implement online growth strategies. Prior to joining eMerchantPay, he worked at Worldpay where he was responsible for some of the largest UK focused sports betting and casino operator acquisitions.
What are the main challenges facing operators and their PSPs?
Regulations, Brexit and challenges related to instant payment technologies are key and we examine each of these below. Change is the common thread between legislation, politics and technology. Change may close one door but open another and forwardthinking operators can create new pockets of innovative operating models.
Industry challenges: regulation
The waltz between regulations and the gambling industry can lead operators a merry dance. A common result is the review of existing business operating models, forcing operators to tweak these further. But not all is bleak; regulatory change also opens up new opportunities.
Portugal: 2017 figures published by the Serviço de Regulação e Inspeção de Jogos (SRIJ) indicated that the high taxation rates have not been a market killer. In fact, online sports betting revenues are virtually the same as Spain (source: Legal Sports Report). Despite expert predictions calling for lower tax rates, a figure of €20.5m was recorded in Q4. Further testament to this are Q2 2018 figures, at €37.4m (source: eGR Magazine).
Germany: as far as online gambling is concerned Germany remains a strong market with €35bn generated per year, according to Handelsblatt Global. However, with the country’s Interstate Treaty on Gambling challenged, the licensing debate is still ongoing and more appeals are being made to review the country’s regulatory landscape.
Sweden: the re-regulation of the Swedish market aims to increase safety, with a focus on improving customer protection and overall game security. Six different licenses are on offer and as of 1 August, 2018, many operators have started the application process. As Sweden becomes more attractive, the competition for licenses and market share will no doubt become even fiercer.
US: the repeal of PASPA means that there’s no longer a federal ban and states can now consider legalising sports betting within their jurisdiction. It’s time for operators to analyse the market to see if they want in. Companies must continue to monitor developments in each state while trying to evaluate the potential of the market and customer base.
Industry challenges: Brexit
Depending on the outcome of Brexit, UK payment providers and their acquiring licenses (if applicable) may no longer be passported across the EU. This could result in a change to UK acquired transactions with regards to interchange and scheme fee costs, which may impact all operators servicing the UK market.
Industry challenges: instant payout capability
The new Visa Direct and Mastercard Send services will certainly enhance the desired instant/real-time payment experience. This requires issuers, payment processers and operators to make changes to their systems and operating models, which obviously comes with a cost. The effect of issuers planning to migrate from Visa to Mastercard is also worth consideration as there will be an increase in payout costs due to Payment Transactions (PTs) being more expensive than Original Credit Transactions, not to mention the different scheme rules regarding Mastercard PTs. Other options include instant bank transfers which have been successful in countries such as Australia and Sweden.
What are the areas and regions of growth?
Customer demands and the pace of change occurring within many territories offers operators new opportunities for growth and expansion.
Brazil: there is potential for Brazil to become one of the world’s largest online gambling territories if regulation is confirmed. This is due to its market characteristics—a large population, the incoming of millennials and a seamless setup. However, the political landscape makes regulatory talks tricky.
Colombia: gaming tax collection grew by 20% in 2017 (source: Gambling Compliance) and with a piecemeal expansion in terms of new licenses and regulated products, this is one of the markets to watch as it could be worth about $70m by 2020.
Peru: regulated gambling is a possibility, with lawmakers putting forward a proposal to legalise online gaming. If it regulates, a licenced Peruvian market has the potential to be worth $200m, as reported by eGR.
US: the September figures for New Jersey are in and they saw overall betting revenue nearly double from August’s $95m to $184m. Online and mobile made up more than 50% of that number at $104m. These early indications suggest we will continue to see the numbers rise as online operators optimise and improve their offerings.
Customer payment preferences
More players are looking to bet and play in ways to fit their lifestyle, and this of course includes using mobile devices. On average, across a sub set of operators, we have seen mobile revenue rise above 60% and in some cases even surpass the 80% mark.
Customers’ need for discretion, faster payments and seamless experiences drive payment preferences. In addition to mobile payments, wallets and real-time bank transfers continue to grow in popularity versus cards.
Which innovations have the potential to transform the product and player experience?
Among other key success criteria, payment processing should be as efficient as possible with speed being a key driver. With this in mind, it is not surprising that customers are adopting new payment methods, designed to enable fast deposits and payouts. But it doesn’t stop there; customers now demand both seamless and immersive experiences.
Players can now customise in-game avatars thanks to VR technology recently deployed by the likes of Poker Stars and Stoiximan.
In addition, a number of large operators now offer a facial recognition login.
This may open the door for payments to be made using a similar method in the future.
COMPANY PROFILE
•NAME EMERCHANTPAY LTD •FOUNDED 2002 •SECTOR GAMBLING, GAMING, FX, RETAIL, TRAVEL & FINANCE•WEBSITEEMERCHANTPAY.COM•TWITTER@EMERCHANTPAY