The gaming industry has been one of the largest segments of ecommerce traffic since its inception in the late 1990's with no signs of slowing down anytime soon. With 2016 estimates showing about $45 billion in revenue, and 2018 projections placing it at about $56 billion, the gaming merchant account services industry is still a rapidly growing segment of the ecommerce landscape.
Merchants operating in the gambling industry do face some obstacles when it does come to establish high risk credit card processing services for their company. Many countries have taken steps to make gambling online illegal; by eliminating the ability for merchants to accept or send payments, creating a sort of illegal market for the industry to operate within. In such places as the United States, individual States have begun regulating and legalizing online gambling within their borders, but this does not always make it easy for businesses to operate.
There are 2 types of gaming merchant accounts that payment processors can use, coded and non coded accounts. Every merchant is assigned a merchant category code (MCC) depending on the type of business they are operating. Merchants that are operating licensed gaming companies or websites will generally be set up as being a Coded gaming service, using the MCC code of 7995, that is used by providers for games and other such activities.
Merchants that operate using a gaming merchant account put the payment processor and banks at risk for significant fines. Many times, these merchants can be fraudulent or laundering money, more reasons that banks and payment processors not providing thorough background checks or not willing the take the risk avoid gambling altogether.
The online gambling industry is a thriving and continual growth industry that will continue to have banks and other payment organizations looking to increase the number of gaming merchant account clients in their portfolios.
One of the largest ecommerce credit card processing sectors in the world has consistently been the online gaming industry; generating over an estimated $45 billion in revenues in 2016 and increasing to an estimated $56 billion in 2018. As the demand for gambling credit card processing continues to increase, merchants are facing 2 major issues; establishing secure payment processing solutions and fighting fraud.
More and more banks have tightened the restrictions facing the online gambling industry due to the ever changing legal landscape surround the legality of online gambling. Within the United States, online gambling remains illegal except for 3 states that have passed legislation to allow internet gambling; Nevada, Delaware and New Jersey. While more states are considering the idea of legalizing internet gambling, it is still a ways off and even with the passage of laws in some states, banks and other financial institutions are still hesitant to provide gaming credit card processing services.
Banks also have other concerns when it comes to gaming credit card processing accounts, the frequency and persistent problem of fraud. The most common fraud is not from stolen credit card account information; but from the card holders reporting friendly fraud, also known as chargeback fraud. In gaming, this occurs when a customer authorizes a charge, uses the funds for sports betting or in a game and loses the money. Instead of accepting the loses, some players will call their credit card bank and report a theft to recoup the loses instead of paying the charges, resulting in a chargeback and loss of funds for the gambling company.
How Does a Credit Card Transaction Work
For an online gaming credit card processing transaction to occur, the business needs to have a few key components in place. Businesses will need to have a gaming merchant account, a shopping cart built into their website and a payment gateway integrated into the shopping cart.
Once a customer is ready to make a purchase, the website directs the customer to the shopping cart that has a list of the items ready for purchase. From the shopping cart, payment card information is received through a secure connection provided by the high risk payment gateway and sent along to the acquiring bank (merchant's sponsoring bank) for authorization for transfer direct to the corresponding card association, whether its Visa, Mastercard, American Express or Discover.
Once received at the card association, the customer card information is deciphered and transferred to the issuing bank (customers' bank) for authorization of the transaction. Regardless of a positive or negative response, the answer is sent back through the same channels to the merchant website, displaying either an approval or decline nearly instantaneously for the customer.
The demand for gaming credit card processing is only going to increase over time as more and more people start gambling from the comfort and privacy of their own home. As merchants require additional volume and new merchants enter the industry, the need for banks and payment services to handle the increasing demand with continue to grow. Working with a payment processor specializing gaming credit card processing like Island Payments, merchants can be assured their needs will be met with affordable terms and superior service.