Against the backdrop of recent events around the gambling business in the world and a shift from the dead point in reading the law on its legalization, there have been many contradictions and discussions about what awaits this segment of the market in the near future.
It became interesting for us to take a closer look at how the gambling industry is currently developing all over the world, what difficulties gaming operators and their users face, and what exactly is the essence of high-risk merchants.
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The first thing you should pay attention to is the impressive growth rate of the gambling business. According to the research company H2 Gambling Capital (H2G), the capitalization of the gambling market in 2022 around the world amounted to about $484 billion.
In particular, the IGaming segment is one of the fastest growing in the gambling market, accounting for almost 12% of the market share. One of the most profitable regions among gambling is Australia, which began to deregulate the industry back in the 1980s. By the way, losses from betting per adult in Australia last year amounted to $990. That’s 40 percent higher than second-place Singapore, according to H2G, and about double the average for other Western countries like Ireland and Finland.
What prevents payment providers from cooperating with online gaming companies?
Even though online gaming is a highly profitable business, most payment providers today still distance themselves from gambling and sports betting. And if we consider Ukraine as an example and rather controversial issues in the regulation of this segment, we will see that not many providers will be able to guarantee payment processing for such entrepreneurs. Simply because they do not all understand the very nature of this business.
This is partly due to the gambling industry itself and its shattered reputation, high chargeback rates and many unresolved legal issues. After all, as you know, the main risks in the gaming sector are money laundering, frequent chargebacks and a high level of fraud.
In world practice, regulatory requirements come into force, which, as a rule, vary depending on the jurisdiction. According to Christian Chmiel, CEO at Web Shield, in order to prevent the risk of money laundering, merchants must adhere to certain principles. Namely: to verify linked accounts on the platform, to apply strict rules of verification and verification of users at registration (KYC), and to carry out due diligence of customers at the time of payment of winnings.
Attitude of Visa/Mastercard towards merchants in gambling
Many major issuing banks have long banned the use of cards for transactions related to sports betting and gambling. Including Bank of America, Capital One, Chase, Citigroup, Wells Fargo, and American Express generally did not allow their cards to be used for gambling of any kind. But already in March 2018, after the decision of the U.S. Supreme Court on the regulation of sports betting, Chase was one of the first to change its gambling policy and ease the requirements for this type of transaction.
One of the positive changes for issuers was the development of a separate Merchant Category Code by the Visa/Mastercard international payment system for merchants and online betting transactions. This code is assigned to businesses so that the IPU can determine the riskiness of the payment transaction.