What is a gaming payment gateway?

A payment gateway (PG) in online gambling is essentially the third party which facilitates the secure transfer of money from your bank account to the merchant.

Payment Accounts
Xace
Marketing
September 18, 2020
2 mins

A payment gateway (PG) in online gambling is essentially the third party which facilitates the secure transfer of money from your bank account to the merchant’s payment portal, notifying each party of a successful or declined transaction.

The transaction of money involves sensitive information about a person’s bank and card details so it’s vital to make sure that this information stays safe.

Without payment gateways, there wouldn’t be millions of online gamblers worldwide, a total which includes 17% of the UK population. 

NOTE: In the UK, as of 14 April 2020, online gamblers can no longer deposit at online gambling sites using their credit card. The Gambling Commission also announced that support for the comprehensive self-exclusion scheme GamStop is to be a mandatory requirement for all online gambling sites as of 31 March 2020.

The most popular payment gateways include Visa, Mastercard, Skrill, Webmoney, Neteller and Click2Pay. 

How a gaming payment gateway keeps information secure

A payment gateway ensures the information you enter is secure. Here is a list of things that a payment gateway does to keep your data safe:

  • HTTPS -the transaction is carried out through an HTTPS web address. 
  • Hash Functionality - due to the hash function, the system often uses a signed request from the merchant to validate the request of the transaction. This signed request is a secret word. Only the merchant and the payment gateway know what it is.
  • IP Verification - to ensure the security of the payment page result of the process, the IP of the requesting server is verified to detect any malicious activity.
  • Virtual Payer Authentication (VPA) - adds an additional layer of security and helps the online buyers and sellers to easily authenticate each other.

Online gambling and payment gateways

Online gambling is generally considered a high-risk business activity for various reasons.

As payment gateways seek to keep their reputation at high levels, many of the service providers refuse to accept merchant applications from high-risk industries.

Many gaming businesses have a high-volume turnover, which could be a red flag for many payment service providers. Also, as online gambling is a lucrative industry, cybercriminals are actively targeting both service providers and end-users, with a wide range of tactics.

Some of the tactics include gnoming and chip dumping to cheat the system and help a player to win, using stolen credit cards and creating multiple accounts. 

Furthermore, as the stakes are high, gamblers who have lost money on online gaming platforms have a high tendency to launch chargebacks without a valid reason against service providers.

As payment gateways don't like merchants that are increasingly exposed to fraud, have a high rate of chargebacks, and accept payments in high volumes in short periods, most of the service providers will decline gaming applications.

Since their applications have been rejected by the greatest share of service providers, online gaming businesses are often forced to choose a high-risk payment gateway to accept transactions from customers.

While these service providers will allow gaming services to set up a merchant account, they will take advantage of the high-risk nature of their business, and overcharge businesses for using their solutions.

And these payment gateways will often hold onto the funds of online gambling solutions for longer periods before crediting them to their accounts for the same reason.

Even when a gaming business can cope with the high transaction fees and delayed payments, gaming businesses must choose a service provider that has built-in anti-fraud measures to avoid losing money to cybercriminals.

Payment security is also a mandatory requirement when you are looking to create a merchant account at a gateway service to ensure that the funds of your customers stay safe.

Online gambling payments on the rise

The global online gambling and gaming industry is set to reach $1 trillion by 2021 and is truly flourishing.  

The most significant growth in the industry is happening on mobile devices as gambling activities are moving online. The mobile sector of the global gambling market is forecast to grow at a compound annual growth rate (CAGR) of 18.84 percent from 2017-2021.

The payment gateway is an essential part of online transactions because it acts as the intermediate between the merchant and the bank. This is because when gamers make their payment through the chosen payment gateway, they must enter sensitive transaction information. 

Security is obviously the utmost concern for customers. They would have no confidence if payment gateways were not ensuring security and authenticity. 

E-Wallets an alternative payment solution for online gaming businesses

A great alternative for online gaming businesses to accept payments is by utilizing an e-wallet service like STICPAY, a London-based fintech company that offers a next-generation E-wallet service to both end-user and merchants in various industries-including online gambling, ecommerce, forex, and many other sectors. However, they only work with licensed businesses that are complying with the regulatory laws of relevant nations.

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