“Everybody who’s dealing with it knows there’s a churn issue,” lamented Mandi Hart, head of products for Sightline Payments. She was among the speakers at an October 8 discussion at G2E titled “The Evolution of Digital Payments for Online Gaming.”
But the panel could as easily have been named, “As the Product Churns,” as the topic of online customer hyperactivity hijacked the hour at Venetian Expo Center. The ostensible subject was the status of online payments in the wake of the Supreme Court’s 2018 overturning of the Bradley Act (PASPA), opening the door to widespread sports betting in the United States.
“From that point, what we’ve seen is a full evolution,” Hart related. “But we’re still not in an optimal position” and the digital infrastructure is lacking.
“Once PASPA was repealed, everything was a lot easier. Processing payments got less strict,” said Lee Terfloth, CEO of Prime Sports.
Visa authorization for igaming transactions were at 50 percent before 2018, added Christopher Granger, head of gaming and lottery for credit-card provider Visa. “From a numbers perspective, now 95 percent of payments” are processed.
Moderator Jonathan Michaels, principal of Michaels Strategies, noted that during the PASPA era, none of the top 10 banks processed igaming transactions. Now that has gone to nine of 10.
However, panelists contended that payment providers and online sports betting (OSB) operators have gone from too few transactions to arguably too many. Hence, the dreaded churn.
According to Granger, players on some platforms are depositing and withdrawing funds 10 to 20 times a day. “Every click on the meter is a cost to an operator,” he explained. “I don’t see that there’s a silver bullet,” but incentives need to be provided to slow down the turnover. “There has to be some kind of pause.”
“Why do people do that?” asked Hart. “Is this a behavior that starts from a longtime gaming practice? Is it the concept of pulling chips off a table?”
Providers need to make customers feel more safe, Hart reasoned, even if it takes the form of incentives. “Customers have to have access to their money and it has to feel safe.”
“At the end of the day,” Michaels agreed, “people want access to their money.”
Granger argued for a carrot-and-stick approach, saying he talks to operators and tells them to set a limit on transactions. But “no operator wants to be the only one that’s doing something.”
Terfloth traced the behavior to the TITO era. “In sports betting, we never saw this.” He blamed promotions, which he derided as “‘Get $100 every time Patrick Mahomes touches the football!’ That’s really what’s creating these churn habits.”
High-end customers, the CEO added, don’t display such conduct. Operators will, however, see it in the $5,000-depositor range. He said he tries to explain to customers that there’s no benefit in churning their account, adding, “We basically pride ourselves on having an open dialogue.”
Another pitfall of the explosion in transactions is fraud. “Our chargeback rates are really low,” said Terfloth. “We also do a ton of due diligence on our customers.”
“It’s not just the cost of processing a payment,” said Granger of fraud prevention. “If you’re not thinking or talking about fraud, you’re the one that’s going to be hit.” Solutions, he contended, include verification of IP addresses and payor names. “It should have happened 30 years ago,” he said, but has only been implemented in the last year.
It’s tough to stay ahead of fraud, Granger allowed, although Visa and some third parties have solutions. “It’s not that they don’t get hit,” he said of OSB operators, “but they have a very dedicated team that keeps things low. If you’re not focused on [fraud], shame on you, because they’re going to come after you,” Granger concluded.
Terfloth blamed a lack of compliance on marketing departments that often elbow compliance aside, including fraud controls. “The marketing guys are happy. Now compliance is getting in the forefront of this conversation— finally.”
Hart and Granger also turned to the subject of “friendly fraud,” otherwise known as gambler’s remorse, in which a bettor tries to walk back a bad wager. The Visa executive estimated that 75 percent to 90 percent of chargebacks are friendly fraud. The unfortunate reality of ecommerce, he said, is that the rules favor the card holder. Ninety percent of the time, the card issuer, not merchants, will win disputes. “It’s really hard for an operator to thwart that dispute and they end up eating it a lot of the time,” Granger said.
To appease customers and cut down on churn, DraftKings has initiated tracking of payment status, audience members were told. Terfloth was supportive. “We wanted to be that guy that said, ‘You won. You wanted your money. Here it is.’” Four years ago, he continued, the average withdrawal window in New Jersey, however, was seven days.
Terfloth said that operators have, perhaps counterproductively, slowed down payments to reduce churn. Added Hart, “It is critical for customers to know they have access to those funds, whether they’re going to wager them again or not.”
“Payments have to work,” concluded Granger. “They have to be fast.” He also recommended that OSB operators co-brand credit cards, much as Marriott and other companies have done. Such cards are popular, he said, because they betoken brand loyalty. Some casinos have them, while OSB providers don’t.
