Payments in kind

He continues by suggesting that the growth in influence of payments in iGaming as the industry as a whole has matured is unsurprising, given the crucial role payments currently play. The CEO explains that digital payments have diversified, with the emergence of new alternative payments methods (APMs) now offering players more choice over traditional methods like credit and debit cards.

One of the first APMs on the scene, explains Cutler, was digital wallets, a strong payment method for high-volume bettors who commonly frequent multiple iGaming brands. Quoting Paysafe’s 2020 research, he explains that “sports bettors wagering 7+ times a week favoured digital wallets (35%) over all other payment methods.”

Such APMs, he adds, “also offer players a literal alternative when faced with a card decline, which remains an issue in the US market, given the fragmented regulatory landscape. Digital wallets and online cash, or eCash, have served to fill this gap.”

Further referencing the company’s research - which was conducted this time last year - Cutler notes that “when faced with a card decline, over a third of players will use a digital wallet (35%) and 8% use eCash.”

GOING CASHLESS

One such payment method that has experienced significant growth in 2021 is cashless, which is an area that has undergone plenty of change - and a lot of digitisation.

This notion resonates particularly with Sightline Payments, who recently clinched the Payment Solution of the Year Award at the Global Gaming Awards Las Vegas 2021. The group’s Co-CEO Joe Pappano says cashless ecosystems provide consumers with “the same convenience they’ve come to expect in their everyday lives.” Taking a step back for a second, he notes that “you can buy groceries using a mobile wallet and stocks from an app on your phone, yet you still need to carry cash to fund your fun at the casino.” As one of the last remaining cash-based industries in our current economy, Pappano suggests it is “imperative” that the gaming industry modernises payments in order “to keep up with the demands of today’s digitally savvy consumer.”

The CEO continues: “Contactless payments create opportunities that cash simply cannot compete with. Digital solutions enable operators to revolutionise and personalise loyalty rewards by better understanding consumer behaviour on and off their properties. Mobile platforms remove friction from the patron experience by reducing the amount of time spent standing in lines at ATMs, kiosks, and cages.”

According to Pappano, reducing this reliance on cash lowers overhead costs to not only count, but store, transport, and acquire cash, thus optimising operator efficiency. Furthermore, digital payments “empower customers with robust responsible gaming tools that help them keep an eye on their accounts.”

Pappano then points to the pandemic as a key accelerator for the adoption of contactless payments in the gaming industry. Referencing recent research conducted by the American Gaming Association (AGA), asking previous year casino goers their interest level and intent to use contactless and digital payment options, he notes that 57% of respondents said cashless options were ‘very important’, with 54% ‘very likely’ to use such options. When focusing solely on Las Vegas, those figures increase to 64% and 63% respectively.

“When more than half of your customers are seeking to utilise this technology, it’s a good bet that casinos will show an urgency in adopting these new payment methods,” he concludes. On the GI Huddle in October, Global Payments President Christopher Justice reflected on cashless gaming’s growth in 2021. He suggests that operators across the US are now really embracing cashless as “the next new wave.” And that, according to Justice, can in one way or another be linked to the popularity of mobile phones. Today, he explains, “there are more people who have a smartphone than have running water around the world. People use their phones the majority of the time and as of last year, the mobile phone became the main screen for the majority of the population. It’s a solution whose time has come, and which folks have warmed up to, and that’s one of the things today’s on-demand consumer really wants.”

He notes that consumers are demanding such digital-first experiences, whether it be through applications like Amazon or Uber, and now that is being repeated in both iGaming and sports betting across the US.

“So cashless to me is a real gamechanger with numerous benefits for the operator and consumer alike,” continues Justice. “While 2021 - as we’ve seen from the gross gaming revenues being reported - has been the best year ever, cashless is one of those customer conveniences that will determine whose chair the consumer is going to sit in once the music has actually stopped.

“I liken it to pay-at-the-pump, where years ago none of the petroleum guys wanted to implement it because they’d make all of their profitability from their customers coming inside. But what they quickly realised was if they didn’t have pay-at-the-pump, consumers weren’t going to stop, and in fact the majority of Americans will drive to the next station if the pump doesn’t accept their card. I think the same thing is going to happen here with cashless in that it’s a solution that’s here to stay. It meets the expectations of the guest and it’s certainly going to help capture extraordinary market share for those early adopters who get in and provide that much more convenient way to play than their competitors.” Global Payments, notes Justice, is seeing this situation develop in the locations it has launched in over the last few years.

Mikael Lijtenstein

Zak Cutler

SECURITY IS CRUCIAL

While there is huge potential and subsequently huge excitement for payments companies in the gaming industry, there are, of course, other important factors to take into consideration when overseeing transactions. Security is a major factor.

It is a topic that AstroPay’s Lijtenstein hones in on when discussing online payments, saying it “is an issue that has gained massive attention recently due to increasing cases of online fraud. As the number of digital transactions processed daily continues to

increase, security has become more prominent than ever.

“Using top-notch technology and IT security practices is a must in this industry, but it is far from being enough. In our experience, the main driver for safety and security is understanding the end customer as much as possible and fostering a bond of trust with them. Behavioural analytics aim at taking that bond to the next level, knowing the customer not only by the information they share or the usage they make of the service, but also based on fine-grained usage patterns such as recurrence, time of the day and special attributes.”

He continues: “Combined with adaptive security, services can toughen up and ask for extended authentication processes only to users who do not comply with normal usage patterns, which is a typical indicator of the identity-theft-family of scams.”

The CEO adds that applying such a strategy to enable smart fraud prevention is rapidly becoming commonplace in the gaming industry, and “is a key differentiator for payment services.”

Taking a more technical standpoint, Trust Payments’ Jones explains that there are a number of standards and practices gaming companies can follow when attempting to keep payments secure.

“Choosing the right payment provider is vital for gaming operators to thrive in this industry,” she tells Gambling Insider. “The right supplier needs to ensure that they are 3D Secure 2 (3DS2) ready and are PCI DSS level 1 to help reduce chargebacks and fraud and have the best level of protection for customer data. 3DS2 is an enhanced method of confirming customer identity by using fingerprint authentication, voice or face recognition, and behavioural biometrics.

“PCI DSS is the Payment Card Industry Data Security Standards – a set of global security standards that ensure every company that collects, processes, stores, or transmits cardholder data maintains a secure cardholder data environment. Complying with this standard is mandatory in every industry, so your payment gateway will need to be certified for PCI DSS.”

The Gaming Business Development Manager continues: “Moreover, beyond know-your-customer (KYC) identity verification processes, transaction monitoring for AML (anti-money laundering) is also an essential undertaking - it’s essential operators pick a payment gateway that can monitor transactions and fraud in real-time.”

WHAT DOES THE FUTURE HOLD?

So, all in all, a very exciting and very busy time for payments within the gaming industry, both land-based and online. But what happens next? What does the future - both short term and long term - have in store for the sector?

When Gambling Insider puts the question to Trustly’s Mallia, he replies by suggesting that innovation in payments is often freely bandied about, yet “rarely does it truly reflect the actual changes.” The continuous improvements in technology, he explains, alongside a constant need for better and more seamless payment methods, “means we are moving towards one direction, and we do not see it reverting.” The Gaming Accounts Team Manager is another to stress the role of the pandemic on the acceleration of this transition.

“Operators want to offer a more seamless experience with less friction which allows more time in allowing users to actually enjoy the product offering,” adds Mallia. “This is also aligned with users constantly choosing to use the quickest, safest and most enjoyable experience they can find. Payments are a very significant part of that.

“We can expect to see a further push when it comes to using payments not just as an enabler of transferring funds from one point to another, but also of being a provider of relevant data with features and products such as AIS, KYC data, affordability checks and other features gaining traction and feasibility thanks to the ongoing open banking push. These and other features will assist companies in making better choices and being more compliant in an ever increasingly regulated market while allowing them to do so without impeding their users’ experience, benefiting both the end users and the operators.”

Another trend that can be expected in the near future is the presence of more secure and mobile relevant authentication methods. According to Mallia, more banks will introduce more modern authentication methods, which will be more in line with the user requirements of today.

“With both the payments and gaming industries maturing and becoming increasingly competitive, innovation in payments will not just determine the way forward for payments, but also for the gaming industry itself by helping gaming companies achieve their aims,” he concludes.

Klatchko is another to touch on the future of the sector, with the Praxis Founder & Director focusing specifically on what lies ahead for high-risk payments in the online gaming industry. He immediately points to three things; localisation, innovation and a need for more solutions.

“Competition in traditional geo-targeting has long passed its boiling point,” he says. “This leaves little room for newcomers looking to sell traditional payment solutions in well-seasoned markets.

“On the other hand, local providers in emerging markets, from LatAm to MENA and South East Asia, are not managing to meet onboarding and volume demands. This opens up a niche for PSP aggregators who can relieve the burden of onboarding, while additional local solutions rise up to the challenge of providing e-wallets and local, instant banking solutions.”

In order to stay in the game, Klatchko explains that operators must provide staff with the “tools to execute amendments per region, payment method and player class, in real time.” He concludes by saying that operators, in order to stay competitive with affiliates and maximise other marketing activities, must also pay close attention to “approval ratios and settlement times over price sensitivity.” Any companies that don’t will be sure to pay the price.

DEBIT CARD

2021: THE YEAR IN REVIEW

Gambling Insider Editor Tim Poole looks back on 12 months that accelerated the winds of change, brought players back to casinos en masse and saw online gambling’s emphatic surge continue

In an autobiography I read this year, 2020 was referred to as The Cursed Year. On that basis – thankfully – 2021 will very much be reflected upon as a year of recovery: economically, socially, physically and psychologically. While land-based casinos were shut for months and socially restricted for most of 2020, they were back to generate record revenues in 2021 (certainly in North America at least). Nowhere more so than in gambling’s spiritual, and historically most lucrative, home: Nevada. Like the t-shirt Joe Swanson enjoyed so much in Family Guy, we are literally talking about billions spent in Las Vegas aka Lost Wages. Gross gaming revenue was back with a bang in 2021.

A common pandemic-era misconception, industry-changing M&A that took place. This year, in particular, it was difficult to even keep track of who was acquiring whom (Monica: you know, sometimes it’s who!). The past 12 months additionally saw whole new M&A trends develop, such as operators starting to acquire suppliers more often, and equally creating their own game studios. As ever, there were numerous affiliate M&A transactions, while the big-name US operators conducted plenty of new business, too.

Notable M&A deals included: - Penn National Gaming purchasing Score Media and Gaming – $2bn - DraftKings purchasing Golden Nugget Online Gaming – $1.56bn

meanwhile, was that somehow online gambling suffered in 2020 too. It did not. And, this year, that growth soared to new levels, as the online industry began to widen its influence in North America, continued to deliver results across Europe and even penetrated several emerging markets. But what will we look back on a few years down the line and truly remember 2021 for? There were mega mergers, regulatory fallouts and coronavirus complications. Just another year in gambling...

INDUSTRY CONSOLIDATION

Inevitably for the gambling and iGaming sectors, the most memorable aspect of 2021 – and recent years in general – was the

- Evolution Gaming acquiring Big Time Gaming – €450m ($533m) - Kindred Group acquiring Relax Gaming – undisclosed fee - Scientific Games buying Lightning Box Games – undisclosed fee - Aristocrat purchasing Playtech for $2.9bn

And that’s without touching on 888 Holdings purchasing William Hill’s European assets, or failed bids to takeover Crown Resorts. Overall, the industry’s consolidation scene became even more frantic in 2021 – and in gaming, it shows no signs of slowing down.

THE CROWN IS FALLING

Speaking of Crown Resorts, 2021 was undeniably a year to forget for the Australian operator. While 2020 proved disastrous on a global scale, from a business perspective Crown Resorts arguably suffered a far worse 2021. The organisation’s revenue for the financial year 2020-2021 fell 31% year-on-year to AU$1.5bn (US$1.1bn), with EBITDA down 77% and overall losses up to AU$261.6m. But while these financial results can mainly be attributed to Covid-19-enforced closures and social distancing, Crown’s regulatory troubles were all self-inflicted.

As we covered in depth in the May/ June edition of Gambling Insider magazine, commission after commission, from Perth to Victoria, have looked into Crown Resorts’ malfunctioning safer gambling policies – with yet more action being taken since. There have been allegations of money laundering – with video proof – gamblers suing Crown for millions lost during problem gambling sprees, and licences stripped outright from the Australian operator. To top it all off, potential mergers have fallen through as a result of the aforementioned problems, with executive reshuffles becoming the norm. In August, Crown banned over 250 high rollers amid “due diligence” reviews – but it was too little too late from the gambling giant.

THE UK: A REGULATORY QUESTION MARK?

When discussing regulation in 2021, it’s impossible not to turn to the UK market. While Crown Resorts suffered 12 months to forget, UK-based Football Index simply ceased to exist altogether during the period. Things came to a head quickly for the operator, which had in the years prior only just embarked on national sponsorships and televised advertising campaigns. Allowing players to “invest” by purchasing shares in professional footballers, as opposed to the traditional sportsbook format, Football Index reached a stage where it was generating hundreds of millions in trades during the financial year.

But it all swiftly unravelled, with a March announcement that dividends were to cut by 80% being followed by player unrest. Not too long after, Football Index went into administration – before the Gambling Commission rather belatedly, and pointlessly by that stage, revoked its UK gambling licence. Here, the role of the Commission – considered one of the world’s leading regulators in many circles – came under serious scrutiny. It declared it had investigated Football Index for a whole year and decided there was no cause for concern, despite multiple written warnings from concerned parties.

Given the eventual outcome, and the Commission’s limp response once Football Index had gone into administration and left players potentially thousands out of pocket, it’s difficult to see how at any point the regulator could have warranted its lack of action. Indeed, ominously timed, Chief Executive Neil MacArthur promptly resigned, with the UK Government conducting a review into gambling regulation and the role of the Gambling Commission all the while. It remains to be seen in 2022 how any policy will affect the UK market – but there is plenty of uncertainty, given some slot restrictions have already been introduced in the region. That uncertainty further extends to the UK’s National Lottery, which may welcome a new host from 2024 onwards.

THE US: A SIMPLY BOOMING MARKET

Let no one fool you any longer: if anyone is pretending US gaming is not thriving, due to Covid-19 restrictions, they’ve either not been paying attention or have an ulterior motive. Gaming revenue in Nevada broke records in 2021, with five months in a row of billion-dollar gross gaming revenue and counting. Pent-up demand has seen people flock back to casinos en masse and, as I wrote in my Editor’s Letter in the September/ October edition, it’s now time to genuinely ask US gaming companies if they have already recouped their losses for 2020. While 2020 was catastrophic for land-based casinos, 2021 has been so good it’s not unreasonable to suggest it is evening the playing field for the past 24 months.

Online, too, saw further US breakthroughs – which is nothing new and something I’ve been writing since PASPA was overturned in 2018. New states regulated sports betting – and iGaming – and on top of the mergers we have already mentioned, huge media content deals were signed by affiliates, and leading operators like FanDuel and DraftKings. The focus on North America, too, has broadened from just the US to Canada, following the legalisation of single-event sports wagering in the country – and the expected regulation of iGaming in Ontario.

EUROPEAN PROMISE

In mainland Europe, meanwhile, 2021 brought more positivity for gaming. There was strong performance in Italy; the Dutch online gaming market was finally launched, while Germany saw progress too – despite a challenging set of regulations. Swedish firms thrived, Evolution in particular (as was covered in our July/August cover feature), while Euro 2020 brought a long-awaited and one-year-overdue gold rush for sports betting firms. Football almost came home for England fans, but the fact the English national team reached the final and promptly lost on penalties was probably the dream result for operators in the end.

Elsewhere, Asian markets such as Macau still lagged behind their European and American counterparts, but crypto betting saw a renewed surge of interest in 2021. Events were still more or less non-existent throughout the calendar year, until the Global Gaming Expo (G2E) returned to Las Vegas in October. As such, the Global Gaming Awards Las Vegas also returned to crown their winners, while there was a virtual show for the London Awards. Overall, 2021 had its drawbacks: no year can be perfect but following 2020? It would have been difficult to avoid a year-on-year improvement. For gaming, this improvement came in spades, and this past 12 months was definitely an ace in the pack compared to last year’s fold.

2022: WHAT LIES AHEAD?

Is it a bird? Is it a plane? No, it’s Tim Poole with Gambling Insider’s 2022 industry predictions

Every December, executives and analysts from across the gambling sector may gaze up at the clouds, asking what the next 12 months have in store for them. In most cases, no one in this fast-paced industry is likely to be in exactly the same position as the prior December. Situations change rapidly and trends take shape with urgency in gambling. Just look back to 2019: could anyone have predicted a global pandemic would reshape the industry in its entirety in 2020?

At the same time, though, in our sector there are certain stalwarts – occurrences that are guaranteed to happen with greater certainty as each year passes. Examples are industry consolidation, new US states legalising sports betting and Bet365 reporting incredible revenue figures... To that end, let’s preview what lies ahead in 2022. In true Gambling Insider fashion, we won’t be afraid to make a few bold predictions – because we know there are a number of safe bets we can fall back on.

M&A: WHO MOVES WHERE?

The easiest prediction in the world of gambling: there will be industry M&A in 2022. More difficult is to say where it will take place, although there are some patterns that are, again, easy to identify. The most recent M&A trends to develop in gambling are those of operators buying suppliers and operators creating their own game studios (like LeoVegas and Penn National). This is more than likely to continue. You’ll also get really short (hypothetical) odds on Evolution buying another company in 2022. In 2020, Evolution took over NetEnt for a sizeable $2.1bn, before acquiring Big Time Gaming for €450m ($533m) in 2021. In light of the supplier’s dominance in several markets and growth trajectory, it looks set to purchase another games studio within the next 12 months.

Given the general growth gambling is enjoying – mainly on the digital side – more and more of our sector’s biggest firms are likely to go public in 2022, following this year’s rush of gambling companies taking their stock to market. As discussed in our September/October SPACs vs IPO cover feature, the growing number of SPAC (Special Purpose Acquisition Company) transactions is unlikely to dwindle any time soon. There are more of them than ever in gaming, and a wide range of firms with more value built into their future growth than their historic results. They’ll be sure to capitalise on this faster, arguably more efficient, method of going public.

AN EVENT-FULL YEAR

Considering how much this industry has missed physical trade shows and events over the past 18 months,

KEEPING THINGS SIMPLE

In my most specific prediction here, I’m willing to publicly declare my belief that Simplebet will become a huge industry name in the years to come – and definitely enjoy further growth in 2022. No, I’m not on the company’s payroll. Simplebet is a US-facing sports betting provider that specialises in micro-betting technology; in the simplest terms – if you’ll pardon the pun – all this means is it maximises opportunities for in-play betting on: the next pitch, the next throw, the next three-pointer. It’s good and bad news for sports bettors; it gives them ample opportunity to wager but ample opportunity to lose, lose and lose some more.

Big-name operators will love this technology; and many already do, with DraftKings and FanDuel having partnered with the firm early on in its trajectory. There’s not just that, but the small matter of former MGM Resorts International CEO Jim Murren joining its board and even YouTuber-cum-boxer Jake Paul’s investment company contributing to its $30m Series B investment round. As the North American sports wagering market matures, operators will be on the lookout for quick, sharp technology that maximises efficiency in every way it can. So watch this space – and watch out for Simplebet.