ETA Expert Insights: Mobile Payments and Gaming – Q+A with Paysafe

By the ETA Mobile Payments Committee.

The ETA Mobile Payments Committee recently interviewed Neil Erlick, Executive Vice President of Business Development, Gaming, at Paysafe on the legal environment and market for mobile gaming payments in the United States.

ETA: Where does the industry stand from a legal perspective in the US?

Erlick: The US online gambling and sports-betting industry remains highly regulated. Until 2018, there was a federal ban on single-event sports betting outside of Nevada. However, since the Supreme Court’s decision to repeal the PASPA legislation in May 2018, individual states now have the discretion to regulate gaming legislation on their own. Post-PASPA, close to 15 states have legalized sports-betting, with 10 states’ legislation also permitting online wagering of some description. It’s not an exaggeration to say that the last 18 months have signaled a sea-change for US gaming.

Despite this progress, the fragmented regulatory landscape limits the activity of operators and, by extension, payment service providers to a small, though growing, cohort of states with legal markets. The regulatory history of US gaming has meant that card declines remain a persistent challenge for iGaming brands and their customers. Several of the top US issuers of VISA and Mastercard do not process deposits for online gambling using their credit and debit cards.

This has led to almost a fifth (19%) of US sport bettors experiencing a card decline when wagering online, according to Paysafe’s Q1 2019 consumer research. Our survey also revealed that over half (51%) of players whose card has been declined face this issue most of the time they wager.

ETA: What are some use cases and examples of mobile payment flows within gaming?

Erlick: Mobile penetration in the US has never been higher. Eighty-one percent of American adults own a smart phone, according to data from Pew Research Center for Q1 2019. Moreover, our own research for the same quarter reveals that more potential US bettors want to place an online wager through a brand’s app on their smart phone (33%) than via their desktop PC (29%). In New Jersey, for example, approximately 80% of all sports betting revenue was made from mobile applications and transactions.

As with all mobile usage, users tend to spend more time using apps than mobile websites. That said, 22% of potential US bettors still want to use a sportsbook’s mobile site to wager rather than its app. Most brands attempt to bridge the app-mobile web divide by offering their users both.

In terms of specific payment flows, Nevada was the one state exempt from PASPA’s single-event sports-betting ban, allowing mobile wagering but with restrictions on online deposits. To deposit money in a Nevada sports-betting app, players were – and still are – required to deposit money at a related brick-and-mortar sportsbook.

Post-PASPA, states like New Jersey have streamlined payment flows. While all New Jersey sportsbook apps have to be affiliated to a land-based casino, racetrack of sportsbook, players have multiple deposit choices. They can certainly choose to deposit in person with cash at an associated casino or racetrack cage, though the apps and mobile sportsbooks offer a range of card not present (CNP) deposit methods – from credit/debit cards to digital wallets and bank transfer and real-time ACH, among others. New Jersey’s broad and inclusive approach to mobile payments is proving to be the model for other states.

ETA: Outside of standard payment methods like credit and debit cards, what are some other payment methods that are important to the gaming space?

Erlick: In common with other US ecommerce verticals, customers at online gambling brands and sportsbooks tend to favor cards as a payment method. Of potential US sports bettors we surveyed in Q1 2019, close to a third preferred using a credit card (32%) or debit card (31%) to other methods.

However, the issue of card declines has meant that both gaming operators and their customers are embracing alternative payments. Digital wallets are the top alternative payment method for players experiencing a card decline, favored by over a third of players (35%), according to our research. Online cash vouchers and prepaid card solutions like our paysafecard product are also a popular alternative to cards, with 22% of bettors using this method to enable them to wager.

Regardless of the friction of card declines, US online sports bettors seem keen to try alternative methods if they are easy to use and offer advantages not afforded by cards, such as privacy. Indeed, over half of gamblers we surveyed in Q1 2019 (51%) would use an online cash solution if it streamlined the payment experience and protected them from sharing their card details. Other methods favored by US sports-bettors include instant ACH transfer and other types of bank transfer.

Overall, the unique nature of the US gaming ecosystem is ensuring that a diverse array of payment methods is being offered to consumers. Indeed, close to a quarter (23%) of US sports-bettors we surveyed said the number of payment methods a sportsbook offered was a key differentiator. As a result, forward-thinking payment service providers are developing platforms to offer operators a comprehensive suite of payment methods through a single integration.

ETA: What are some of the unexpected challenges in enabling in-app payments for mobile games?

Erlick: Aside from the issue of card declines, which is not specific to in-app payments for gaming, the payments challenges remain the same as for any product with a mobile app.

ETA: How does the provisioning/solution differ from other kinds of in-app payments?  

Erlick: The provisioning is essentially the same. However, with challenges like card declines, operators need to offer customers an even broader range of payment methods than other merchants to remain competitive.

ETA: How did Paysafe come to be involved in this segment? Where and when did you see the opportunity?

Erlick: We rebranded as Paysafe in 2015, but our company has its origins in the late 1990s. In that period, ecommerce was very much in its infancy, though the online gambling segment was already thriving. European bookmakers were transitioning their businesses into the digital space, and standalone online poker and casino brands were also emerging. We saw an early opportunity to providing payment processing to this burgeoning industry.

Through various M&A over the years, we’ve diversified our offering to include two of the gaming industry’s leading digital wallets – first NETELLER and then Skrill – as well as paysafecard, our prepaid online payment solution.

Online gaming has always been part of our company’s DNA, and we’ve grown in tandem with the wider industry. While the global market has seen consistent growth over the last 25 years, the US market offers huge potential going forward.

ETA: How has the recent Supreme Court decision legalizing sports betting affected this vertical? 

Erlick: The Supreme Court’s repeal of PASPA in 2018 has led to almost 15 states regulating single-event sports betting in under 18 months. And the future looks bright: The US is expected to be bigger than mature sports-betting markets like the UK by as early as 2023, according to H2 Gambling Capital. The researcher also predicts that the market’s revenue will reach $8 billion by 2030. In short, over the next decade the US gaming space is likely to become a major sector for operators – and the payment providers that service them.