Online gaming, online casinos, and other sports betting industries are exploding in recent years with expectations of market growth to reach a total of $2.2 trillion by 2021. However, the world of sports betting is complicated due to many legal restrictions. The legality of sports betting varies on a state-by-state basis, making payment processing, and any other action related to sports betting, considered to be high-risk.
Many Payment Processors Stay Away from Gambling and Sports Betting
Unfortunately for those who run sports betting or gambling businesses, most banks and payment processors will refuse to support their business. Due to the industry’s background and reputation, high chargeback ratio, and potential legal issues, sports betting businesses are labeled as high-risk. As such, sports gambling merchants need to have a specific type of account that is designed for high-risk businesses in order to process and accept payments.
Additionally, payment processors currently bear the responsibility of ensuring that they do not provide merchant services to businesses that offer illegal services. Since the responsibility is on the payment processor, some processors simply choose not to be involved with industries that may be a part of high-risk industries. One notable example of a merchant services provider choosing not to work with high-risk businesses is Vantiv Entertainment Solutions dropping payment processing clients like DraftKings and FanDuel. It’s important that businesses in high-risk industries take the extra time to find a trusted payment processor that will work with them to understand and meet their needs for their businesses.
Another reason that gambling and sports betting industries are considered to be high-risk is a high chargeback ratio. This is a concern in any industry as buyer’s remorse is always a possibility. However, the risk is particularly high in sports gambling as many customers change their minds and decide to cancel a service or dispute a transaction.
To further complicate matters, some payment providers do not want to deal with the complexities of the federal and state laws and regulations regarding sports gambling. Most find it simpler to profit from industries with more clear-cut regulations and laws. To round out the concerns, there are also complications due to the age restrictions of the industry.
The Gambling and Sports Betting Industry is Changing
Despite the challenges that turn payment processors away from working with the sports gambling industry, the outlook is looking better. The industry is changing for the better in terms of availability.
The biggest step in this change took place on May 14, 2018, when the Supreme Court ruled in Murphy v. NCAA. This ruling overturned a 1992 federal law that prohibited the legalization of sports gambling in states where it was not already legalized, which impacted the growth of the industry.
Since this decision is still relatively new, time will tell the impact of it on the industry, especially in regard to credit card processing. Even with this ruling, it is likely that payment processors will continue to consider sports gambling high-risk due to a range of factors.
What Does This Mean for Merchants?
As a merchant in the sports gambling industry, the bottom line is that barriers to entry for sports gambling are being reduced, with significant help from the recent Supreme Court ruling.
Since many gamblers choose to bet on weekly games, or even more frequently, there is a great deal of potential for growth in the industry. That is particularly true now that more states have the ability to legalize the industry.
Merchants should keep in mind that even with changing regulations, they are still in a unique position compared to merchants in other industries. The merchant accounts with high risk will cost more than their low-risk counterparts. Gambling accounts will continue to fit in the high-risk category and this is unlikely to change anytime soon.
Furthermore, high-risk payment processing is very specific to a particular business in comparison to other payment processing. As such, merchants should always request quotes that are tailored to their business and take action to reduce chargeback frequencies by clearly displaying the business name on all materials and receipts and making attempts to offer full refunds over chargebacks with dissatisfied customers.
The sports gambling industry has great potential for growth, which may expand offerings among payment processors, but it is still too early to tell. Even with the growth, sports gambling merchants should opt for a payment processor that specializes in high-risk payment processing. BankCard Services perfectly fits that description.
Here at BankCard Services, we are equipped to help high-risk businesses get approved and stay approved for merchant accounts, increase their revenue, lower their chargeback ratio, and prevent fraud. We have also taken steps to streamline and simplify the process of getting quotes. Requesting a quote with BankCard is free and private with absolutely no obligation. Contact us today to learn more about getting started with a high-risk merchant account.