A payment gateway (PG) in online gambling is essentially the third party which facilitates the secure transfer of money from your account to the merchant’s payment portal, notifying each party of a successful or declined transaction.
The transaction of money involves sensitive information about a person’s bank and card details so it’s vital to make sure that this information stays safe.
Without payment gateways, there wouldn’t be millions of online gamblers worldwide. By 2029, it’s expected that over 280 million people will use online gambling services.
NOTE: In the UK, as of 14 April 2020, online gamblers can no longer deposit at online gambling sites using their credit card via gaming payment processors. The Gambling Commission also announced that support for the comprehensive self-exclusion scheme GamStop is to be a mandatory requirement for all online gambling sites as of 31 March 2020.
The most popular payment gateways include PayPal, Visa, Mastercard, Skrill, Webmoney, Neteller and Click2Pay. Some payment gateway providers offer features and services that support the unique needs of iGaming businesses. Examples include Total Processing, Mollie, Payu, Adyen, and XacePay.
How a gaming payment gateway keeps information secure
A payment gateway ensures the information you enter is secure. Here is a list of things that a payment gateway does to keep your data safe:
- HTTPS -the transaction is carried out through an HTTPS web address.
- Hash Functionality - due to the hash function, the system often uses a signed request from the merchant to validate the request of the transaction. This signed request is a secret word. Only the merchant and the payment gateway know what it is.
- IP Verification - to ensure the security of the payment page result of the process, the IP of the requesting server is verified to detect any malicious activity.
- Virtual Payer Authentication (VPA) - adds an additional layer of security and helps the online buyers and sellers to easily authenticate each other.
Online gambling and payment gateways
Online gambling is generally considered a high-risk business activity for various reasons.
As payment gateways seek to keep their reputation at high levels, many of the service providers refuse to accept merchant applications from high-risk industries.
Many gaming businesses have a high-volume turnover, which could be a red flag for many payment service providers.
Furthermore, as the stakes are high, gamblers who have lost money on online gaming platforms have a high tendency to launch chargebacks without a valid reason against service providers.
As payment gateways don't like merchants that could be exposed to fraud, have a high rate of chargebacks, and accept payments in high volumes in short periods, some of the service providers will decline gaming applications.
Since their applications may be rejected by a lot of service providers, online gaming businesses are often forced to choose a high-risk payment gateway to accept transactions from customers.
While these service providers will allow gaming services to set up a merchant account, they will adjust for the high-risk nature of their business, and charges may be high for businesses for using their solutions.
Additionally, these payment gateways will often hold onto the funds of online gambling solutions for longer periods before crediting them to their accounts for the same reason.
Even when a gaming business can cope with the high transaction fees and delayed payments, gaming businesses must choose a service provider that has built-in anti-fraud measures to avoid losing money to cybercriminals.
Payment security is also a mandatory requirement when you are looking to create a merchant account at a gateway service to ensure that the funds of your customers stay safe.
Online gambling payments are on the rise
The global online gambling market size was valued at $63.53 billion in 2022. Between 2023 and 2030, the market is expected to grow at a CAGR of 11.7%.
The most significant growth in the industry is happening on mobile devices as gambling activities are moving online. The global mobile gambling market size was worth ~ $84.51 billion in 2023. This figure is predicted to grow to ~ $159.34 billion by 2032, owing to a CAGR of ~8% between 2024 and 2032.
The payment gateway is an essential part of online transactions because it acts as the intermediate between the merchant and the payment account. This is because when gamers make their payment through the chosen payment gateway, they must enter sensitive transaction information.
Security is obviously the utmost concern for customers. They would have no confidence if payment gateways were not ensuring security and authenticity.
E-wallets as an alternative payment solution for online gaming businesses
An e-wallet, also known as a digital wallet, is a great tool for iGaming businesses. It provides a practical alternative for online gaming businesses to accept payments with the help of an e-wallet service company. Next-generation e-wallet companies provide services to both end-users and merchants in various industries-including online gambling and many other sectors. However, they only work with licensed businesses that are complying with the regulatory laws of relevant nations.
Legal and regulatory requirements for gaming payment gateways
Gaming payment gateways must comply with various legal requirements and regulations, particularly related to anti-money laundering (AML) and know-your-customer (KYC) laws, which can vary significantly across different regions and jurisdictions.
Anti-Money Laundering (AML) compliance
Payment gateways operating in the gaming industry are considered both high-risk and vulnerable to money laundering activities. Consequently, they are expected to implement robust AML measures to prevent their platforms from being exploited for illicit purposes.
In the European Union, payment gateways are classified as AML-regulated entities and must adhere to the Anti-Money Laundering Directives (AMLD). This places obligations on payment gateway companies to conduct customer due diligence, monitor transactions for suspicious activities, and report any suspicious transactions to the relevant authorities in a timely manner.
In the United States, the Federal Financial Institutions Examination Council (FFIEC) have published guidelines called the Bank Secrecy Act (BSA) /Anti-Money Laundering (AML) Examination Manual, which outlines money laundering risks encountered by third-party payment processors and includes risk mitigation measures. Businesses that fail to follow this guidance may well find themselves faced with legal troubles, penalties and reputational damage.
Ultimately, in most jurisdictions, payment gateway providers must:
- Satisfy Customer Due Diligence (CDD) requirements, by using KYC checks to verify customers’ identities.
- Continuously monitor transactions to look for any indication of suspicious or illicit activity.
- Adhere to reporting requirements as set out by the regulating bodies, so that the appropriate regulatory authorities are notified of any suspicious transactions within a reasonable or required timeframe.
- Keep records of customer details, transactions and due diligence actions taken, so that this information is properly recorded and stored in line with retention rules.
What technical aspects, including integrations, do gaming payment gateways have to think about?
Integrating a payment gateway into online gaming platforms involves several technical aspects that require careful consideration so that a seamless and secure payment experience for users can be put in place. Here are some key points regarding APIs, platform support, and technical assistance from payment gateway providers:
APIs and integration
Payment gateways typically provide APIs (Application Programming Interfaces) that allow developers to integrate the payment functionality directly into their gaming platforms. These APIs enable communication between the gaming platform and the payment gateway, facilitating the secure transmission of payment data and processing transactions. Without robust APIs to integrate payment services across multiple devices like mobile, tablet, and desktop, gaming platforms simply would not be able to offer secure, quick, and user-friendly payment solutions to their customers.
Generally speaking, payment gateway providers can either provide APIs in the form of hosted payment pages or as a direct API integration. With hosted payment pages, the payment gateway provider hosts a secure payment page on their servers. When a user initiates a payment, they are redirected to this hosted page to enter their payment details. This method simplifies PCI compliance as the gaming platform does not handle sensitive payment data directly.
Should a payment gateway provide a direct API integration, then the payment gateway will be directly integrated into the gaming platform. Whilst this does provide a more seamless user experience (users can process a payment without having to leave the gaming platform), it does require stricter compliance measures. This is because the gambling platform is having to handle sensitive payment information.
Technical support you can expect to receive from payment gateway providers
Reliable technical support from payment gateway providers is crucial for a smooth integration process and seamless ongoing operation and maintenance of the payment gateway. Most payment gateway providers will offer a Software Development Kit (SDK), which contains documentation that guides developers on integration processes for different gaming platforms and programming languages.
Beyond this guidance, most reputable payment gateway providers will provide additional channels of support, including developer forums or portals, testing environments, and direct support channels. This ensures that online gaming platforms can quickly access teams for troubleshooting and testing needs.
How do payment gateways shape overall user experience?
Often, the considerations for what constitutes a good user experience of a payment gateway focuses on transaction speed. However there are more factors that play a critical role in ensuring a frictionless payment experience that contributes to the user’s overall experience in the online gaming platform.
Transaction speed
Transaction speed is by far one of the most important aspects, as delays, lags, or general sluggishness can disrupt gaming experiences, cause frustration, and could lead to a loss in customer numbers if the problem is severe, recurrent, or substantially disruptive to the gaming experience. Reliable payment gateways will ensure that all transactions are processed as quickly as possible.
Clean and intuitive user interface
A payment gateway with a simple, clean and intuitive user interface (UI) is also important. The UI design should support a positive user experience, by providing an easy journey through the payment process. Features such as auto-fill forms, short UI copy, and clear instructions support a streamlined and stress-free journey. Lots of redirections, crowded texts, and clumsy design (especially on mobile devices), can make navigating a simple payment gateway much more difficult. Payment gateway providers understand that the less friction a player experiences, the more likely the transaction will be successful.
Security and trust
Payment gateway providers also need to use their UI design to reassure the user that their sensitive personal and financial information is being handled correctly. This means that data is encrypted where necessary, and other robust security measures are in place to protect customer data and reduce the risk of unauthorised transactions occurring. Security badges, compliance certifications, and other messages can be used to reiterate to the customer that they can use the payment gateway with confidence and complete their transactions with full trust in their igaming platform and payment gateway provider.
Multiple payment options
Finally, many customers now expect more than one option for making payments. Gaming payment gateway providers need to support various payment options, including credit and debit cards, digital or e-wallets, and increasingly, cryptocurrencies. By offering choice and flexibility, users are more likely to complete transactions successfully.
How is blockchain technology impacting gaming payment gateway providers?
The payment gateway industry is witnessing a significant shift towards the integration of blockchain technology and cryptocurrencies, driven by the growing adoption of digital currencies and the demand for secure, transparent, and efficient payment solutions. This trend is poised to have a profound impact on the online gambling and gaming sectors, necessitating the adaptation of payment gateways to accommodate these emerging payment methods.
Multi-currency support and cross-border outlook
As online gambling companies grow their user base around the world, many payment gateway providers are working hard to facilitate multi-currency payments and cross-border transactions. For iGaming companies with international reach, this is especially important.
However, meeting regulatory and compliance obligations across multiple different jurisdictions places additional burdens on many payment gateway providers. Compliant set up and operation may require licences and authorisations that are expensive to obtain and come with strict rules to maintain. Gaming payment gateway providers will have to find the balance between compliance and customer satisfaction, as gambling companies continue to pursue new markets and opportunities.
What does the future hold for gaming payment gateways?
Gaming payment gateways play a crucial role in facilitating secure financial transactions between online gamblers and iGaming platforms. Not only do they enable the safe and compliant transfer of funds from a customer's account to the merchant's payment portal, they also affect the overall gaming experience. Gaming payment gateways, therefore, are more than just a tool for making payments; they can significantly influence customer satisfaction and transaction success rates, too.
As payment gateways work to meet the needs of their online gambling customers, they must also proactively plan for upcoming changes. Emerging trends like blockchain integration, cross-chain compatibility, and multi-currency support are also promising to reshape the payment gateway industry. Simultaneously, the online gambling sector is growing at an exciting rate, and payment gateways must adapt to accommodate sector changes and meet the evolving needs of online gambling businesses and their global customers.
This article was first published on September 18, 2020 and subsequently updated on May 20, 2024.
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