There is a simple reason that online gaming is a booming industry. People like to win. The thrill that comes with placing a bet is something that people crave. It is no wonder that the gaming industry is one of the most lucrative industries in the world.
Online gaming is broken up into two distinct sectors. Online gaming whereby people play traditional games on their cell phones or other platforms, and what we will refer to as iGaming. The iGaming industry is focussed only on online casinos, live sports betting, online poker, and any other game where a wager is required. Knowing that the iGaming industry is going to develop into a US$ 135bn industry by 2027, it’s understandable that the number of players in the industry is growing exponentially. Unfortunately for online gaming companies, that makes it an even riskier sector in the eyes of the bank.
This is one of the reasons that the online gaming sector is considered high risk by banks. All gaming companies looking to open an online gaming account will no doubt have been told that they pose a significant risk to the bank. This is where the need for high-risk payment processors like Octapay comes in. Let’s take a look at some of the other factors influencing the gaming industry.
Why is online gaming considered high risk
Technology has allowed casinos to move from their brick-and-mortar establishments, right into the player’s home. The inception of the internet has made the iGaming industry boom, but it has also made the industry harder to regulate. As it is, casinos and any form of online bet placing lie in a legal grey area. Every country in the world has different laws related to online betting, and in the US alone, each state differs in its legal restrictions. This is a big reason that banks look unfavourably upon giving gaming businesses merchant accounts.
Online casinos have an excessive number of chargebacks. Players that lose large amounts or suffer from ‘bet regret’ are usually the culprits. They will phone the banks up with their tails between their legs and say that it was not their transaction. Most of the time, the banks will comply, and this is detrimental to online casinos. This is the main reason that online gaming companies are placed into the high-risk merchant category. This form of friendly fraud is rampant with online casinos, but there are ways to mitigate it. In the gaming industry, it’s of utmost importance that the merchant clearly identifies themselves for the beneficiary’s statement. This will reduce confusion. If looking a the following example, this transaction could be for anything. Without remembering that specific deposit, the account holder could easily mistake it for a fraudulent transaction.
Card-not-present payments (CNP) are the bread and butter of online gaming. The success of the company is dependent on the ability to accept credit and debit cards virtually. Without the card and the cardholder being physically present, the merchant becomes susceptible to online fraud. This is one of the contributing factors for any business being considered high-risk. This will always be the case, and is why companies need to take care to ensure the protection of their customers by offering secure payment options through their payment processors. This added security is absolutely necessary.
Choosing a merchant account provider
Being considered a high-risk merchant is not a death sentence for your business. All it means is you may have to pay a bit more, complete a few extra forms, and sign a contract which seems a little constricting. These are necessary evils on the part of the payment processor as, by taking on your company, they are assuming the risk associated with it.
At Octapay, we specialise in online gaming companies. The experience and familiarity of the industry that has been obtained by the existing clients is invaluable, both to us and our future gaming partners. In taking personal journeys with our customers over the years, we have seen first hand what curveballs to avoid, and what paths will prove safest. Because of this, we are utterly equipped to ensure the selection of the best high-risk merchant account processor.
Still not sure? Have a chat with one of our gaming experts to see how we can help you push your business into profitability that you never imagined possible.