Online gambling

Why Online gambling businesses are considered High-Risk?

Nature of the Industry

Online gambling involves high volumes of transactions on a daily basis, which increases the risk of fraudulent activities such as chargebacks and money laundering.
The nature of the industry itself makes it difficult for banks and financial institutions to provide merchant accounts to online gambling companies.

Legal and Regulatory Restrictions

Online gambling is subject to numerous regulations and legal restrictions that vary from country to country.
Online gambling companies must comply with these regulations to operate legally, and failure to do so can result in hefty fines and even the revocation of a company’s license to operate.

High Competition

The online gambling industry is highly competitive, with many companies vying for market share.
Companies must invest heavily in marketing and advertising to attract customers, which can be costly.
The high competition in the industry often leads to high chargeback rates and a high risk of fraud.

In conclusion, the nature of the online gambling industry, legal and regulatory restrictions, and high competition make it difficult for online gambling companies to obtain merchant accounts and conduct business online, leading to its classification as a high-risk merchant.

Mitigation measures for Online gambling merchants to reduce risks when selling online

Fraud Prevention

Implement a robust fraud detection system to detect and prevent fraudulent activities.
Use machine learning algorithms, human expertise, and real-time monitoring to identify potential fraudulent activities.

Payment Processing

Use secure payment processing systems to protect sensitive customer information and prevent data breaches.
Use encryption and tokenization to ensure that customer information is safe and secure.

Legal and Regulatory Compliance

Comply with all legal and regulatory requirements to operate legally and avoid hefty fines and license revocation.
Obtain proper licenses, implement age verification systems, and comply with anti-money laundering regulations.

Chargeback Reduction

Take steps to reduce chargeback rates, which can harm their reputation and result in penalties.
Provide clear terms and conditions, offer refunds, and provide excellent customer service to resolve any issues.

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 an Online gambling 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 Online gambling 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.