Fantasy Sports

Why Fantasy Sports businesses are considered High-Risk?

Legal Uncertainty

    • Fantasy sports betting is not legal in all jurisdictions
    • This can lead to payment processing issues, as some payment processors may be hesitant to work with high-risk merchants

 

Potential for Chargebacks and Disputes

      • Customers may dispute charges, claiming that they did not authorize the transaction or received poor service from the merchant
      • This can result in a high number of chargebacks, which can lead to account termination, fines, and penalties

 

Nature of the Industry

    • Fantasy sports involve a high degree of competition and the potential for large payouts, which can increase the likelihood of fraudulent activity
    • Fantasy sports also tend to attract younger, tech-savvy customers, who are more likely to dispute charges or engage in fraudulent activity

Conclusion

  • Fantasy sports websites are considered high-risk merchants due to the legal uncertainty surrounding the industry and the potential for chargebacks and disputes. It is important for fantasy sports merchants to take steps to mitigate these risks and work with a payment processor that specializes in high-risk merchants.
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Mitigation measures for Fantasy Sports merchants to reduce risks when selling online

  • Work with a payment service provider that specializes in high-risk merchants. These payment processors have experience in managing the unique risks associated with fantasy sports, such as chargebacks, and can help merchants mitigate those risks.

  • Implement strong fraud prevention measures, such as two-factor authentication and real-time monitoring for suspicious activity. Merchants can also use tools such as fraud filters and AVS/CVV verification to prevent fraudulent transactions.

  • Clearly communicate the terms and conditions of the service to customers. This can help reduce the likelihood of disputes and chargebacks, as customers will have a clear understanding of what they are agreeing to when using the service.

  • Use robust identity verification methods to ensure that customers are who they say they are. This can include requesting government-issued identification, verifying the customer’s address, and verifying their payment details.

  • Provide excellent customer service and support. By promptly addressing customer inquiries and concerns, merchants can reduce the likelihood of disputes and chargebacks.

Being a high-risk merchant vs. a regular merchant

  • Higher payment processing fees
  • Lengthier application process
  • Higher chargeback fees
  • Cash reserve requirments:
    • Capped reserve
    • Rolling reserve
    • Upfrom reserve
  • Volume caps
  • Additional technical requirements
  • Being on the TMF / MATCH list

 

Check out our knowledge hub to learn more about what processing fees, application process, chargebacks and cash reserve requirements or TMF / MATCH list mean. 

Other risk factors?

There may be other risk factors as to why you as a Fantasy Sports merchant are classified as a high-risk merchant, such as:

  • Accepting subscription-style payments

  • Being on the Member Alert to Control High-Risk Merchants, or MATCH list — a list managed by Mastercard that monitors merchant behavior, like chargeback history

  • High average transaction sizes

  • High sales volumes

  • Highly regulated industries

  • International sales

  • Large number of card-not-present transactions

  • Little to no business experience

  • Long fulfillment time frames

  • New or poor credit scores

  • Past fraud or illegal activity

As high-risk Fantasy Sports merchant how to find a payment provider?

It takes effort for businesses to secure a payment processing partner when they are considered high-risk but it is definetly possible to find the right payment solution if you focus on:

  • Maintaining healthy cash levels. Most processors would like to see a healthy cash level in your business bank account. 
  • Try to reduce chargebacks. There could be a number of factors behind the soaring number of chargebacks in your business. Whatever the reasons may be, you can always analyze them and try to reduce your chargebacks.
  • Be transparent. Disclose all materials and relevant information during the application process. Payment processors may ask you for very detailed information about your business and finances. Be open, honest, and transparent.
  • Keep your documents ready. This could mean having six months of bank statements and a few years of tax returns. That said, each processor has its own set of requirements so make sure to check them.
  • Follow the guidelines of your payment processor. When you apply for a high-risk payment solution, besides your business needs, the risk the payment solutions provider takes also matters. So, be flexible and see if there are things you can do to reduce your risk by discussing with them and following their recommendations.

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