One of the biggest hurdles for online gaming and sports betting has been the fact that many credit cards will not process transactions related to online casino and poker sites. That situation appears to be changing as DraftKings Sportsbook in New Jersey recently joined FanDuel, Caesars online casino and SugarHouse Sportsbook in allowing consumers to use Paypal, one of the largest and most trusted electronic wallet services in the world.
The credit card situation has been a challenge in the Garden State, one of the first to allow legalized online gaming. Legal online casinos still experience up to 50% decline rates with credit cards; when customers try to input their credit card number to play online games or place bets, their cards are declined. This puts a big damper on the appeal of online gaming.
Online gaming profits have been impressive, but the potential income to the state without this challenge could have been even higher.
The New Jersey Division of Gaming Enforcement’s August financials reported that $95.6 million was wagered on sporting events in the state that month, up from to $40.6 million in July. Gross revenues totaled $9.2 million for the industry in August, with revenues of $16.5 million since June 14, the first day of sports betting in the state. How much more could have been earned if customers had easier ways to place their bets?
As online wagering gains acceptance as a profitable and secure form of entertainment, the original hesitation on the part of banks and payment processors to facilitate participation should begin to abate and barriers to consumers may give way more convenience.
Many major card-issuing banks initially decided not to allow transactions related to legal online gaming because they thought the regulatory and privacy risks outweighed any potential financial benefits. Some major banks still decline transactions with online wagering companies including Bank of America, Capital One, Wells Fargo, TD Bank, Union Bank and Huntington Bank.
A variety of alternative payment options arose to fill the void, and this sector of the industry has grown extensively, with bettors using options like eChecks or prepaid cards. Other alternatives include eWallets, Neteller and PayNearMe, in addition to wire transfers, online bill pay, and plain old cash at land-based casinos. Some pioneering companies are exploring the use of cryptocurrencies and tokens through the blockchain.
The addition of the powerful PayPal brand will help address customer dissatisfaction with previously cumbersome payment procedures, and may encourage new gamers to give it a try. Its influence and trusted status may further influence other financial entities to trust online gaming and permit more customers to get in on the fun.