The revolution sparked by the U.S. Supreme Court’s May 2018 ruling that voided a 26-year-old federal law that had effectively given Nevada a monopoly on sports betting has led to more than three dozen states legalizing such gambling.
And with that, there has been a stampede of sportsbook operators all trying to gain market share in multiple states. Consolidations have been many, such as British bookmaking giant William Hill’s U.S. subsidiary being bought up by Caesars Entertainment in 2020 for $3.7 billion or the recent shareholder approval of a sale of Australia-based PointsBet’s U.S. operations to Fanatics for $225 million.
Other headlines noticed by many even casual observers of the gambling sector have included MaximBet, TheScore and FuboTV sportsbooks ceasing operations in 2022.
But there is another, equally intense competition under way in the U.S. gaming industry—and it, too, is likely to wind up in a series of consolidations in the coming years. That would be cashless gaming, the technological advance that increasingly is allowing gamblers to replace traditional cash with digital alternatives.
“For the past few years, the gaming industry has experienced meteoric growth, and the demand for payments solutions has grown along with it,” says Christopher Justice, CEO of Pavilion Payments.
“For now, several payments providers have emerged to serve the gaming industry and have been fairly successful in doing so. However, it seems likely that a few current leaders in the space will continue to grow and out-compete the rest, cementing themselves as the leaders in gaming payments.”
Victor Newsom, senior vice president for product management and payment solutions for Everi, agrees that consolidation is inevitable. But Newsom adds, “I’m not so sure about the coming year. There will absolutely be pressure to merge, if for no other reason than speed. We have a lot of companies that have been very successful in a specific channel with the segments defined the way they were. I think they will be less successful trying to do more against competition in a different channel that is highly optimized there.
“You’re going to see alignments and mergers as inevitable because customer experience and speed to market will become key success factors. You can see it in the larger ecosystems today, and with new regulations, technologies, and better understanding, (consolidation) will continue.”
Noah Acres, a principal of Acres Manufacturing, points out that for casinos to go cashless, they must partner with both a “cashless provider” and a “cashless enabler” to facilitate transactions between a digital wallet and, for example, a slot machine.
“Cashless providers are represented by wallet providers like Everi, Sightline, Koin or FABICash, while cashless enablers include Acres’ Foundation platform as well as legacy CMS providers,” Acres says. “My prediction is that on each front, the industry will consolidate on two to three primary suppliers—whether through (mergers and acquisitions) or attrition.”
Newsom says there is a “fundamental shift” coming in defining the cashless gaming sector from what he calls a “fintech perspective.”
“You must look at the macro pressures that are forcing a convergence of land-based, online and sports wagering along with—in terms of guest experience—retail, hospitality, and venues. So when you add all the players across those current channels, and you look at a sector defined tomorrow in a way that is converged with and without omnichannel experiences, then I think you’re going to see tremendous pressure in knowing who is the player or who is the payment service provider, along with how multiple providers work together (or not). All those different mouths to feed across those different channels of interaction will likely force some consolidation.”
For PayNearMe’s Leighton Webb, vice president and general manager of online sports betting and iGaming, part of the future of the sector will lie in the point that “regional operators will continue to carve out meaningful market share in the markets where they have strategic advantage—meaning, a core database of customers.
“Instead of trying to predict consolidation, operators should be focusing on choosing the tools and partners that will help them win now. We’ve seen repeatedly that those who move quickly and decisively can gain a lasting market share advantage. Evaluating new vendors that support these goals should be a priority.”
And like Newsom, Webb says that with no clear market leader at the moment, it may be too early to project rapid change in the number of brand leaders.
“There are plenty of other scalability, regulatory and operational issues for them to focus on, like finding an experienced payments partner that can help them scale and acquire market growth in a growing, crowded industry,” Webb says.
Young, Old or Both?
Younger gamblers, or “digital natives,” as Justice has called them, are the long-term key to any gaming company’s viability. But older gamblers tend to have more discretionary income, as well as longstanding loyalty to particular casino operators. So, is one consumer sector more important than the other, and are there enough resources available to focus heavily on both simultaneously?
“Casinos can only focus on the players they’re serving today,” Acres says. “But over 30 percent of today’s slot revenue is derived from players age 70 or older, and with average life expectancy being just 77, casinos cannot count on those patrons forever. So casinos have to attract new players immediately.”
Justice notes that the main demographics for casino visitors skew older, “that is to say, 50 years old and over.
“Our intent is to develop solutions that appeal to that market, precisely because they tend to be less intuitively familiar with digital technology,” says Justice. “For patrons who prefer playing with cash, we offer solutions like our VIP Financial Center, which allows patrons to take out cash on the game room floor.
“However, we believe that by emphasizing usability and convenience, we can cater to both old and young patrons. Regardless of age, all patrons want a fast and easy payments experience.”
Webb echoes many of those sentiments.
“While the online betting masses are going to be demographically skewing toward the younger, newer bettor who is very familiar with digital payments, operators will need to continue to focus on their loyal VIPs —which may mean continuing to focus on cash. Regardless, we’ll continue to see progress as far as new digital payment types and emerging technologies for the younger and newer gaming audience.”
Newsom agrees that “we’ve had no real choice but to provide most of our focus on the current gamblers—the generations that have discretionary income. Current systems for land-based solutions have been largely monolithic and/or purpose-built, making digital transformation hard. I think what’s going to happen, in the next one to three years or so, is that this pressure for cross-channel collaboration in the guest experience will force a merged ecosystem that services both simultaneously…
“Digital-first patrons will still expect cross-channel interactions, and will expect them to be robust. When your favorite streaming show can follow you from room to room of your house, your dog’s food bowl orders more from Amazon, and a whole host of smart city experiences set the bar, the industry will be expected to keep up.”
Current markets, future markets, commercial casinos, tribal casinos—payment operators have some challenging choices to make in the years ahead.
“The good news—and it’s not just at the payments level, it’s more broadly—is that Everi has been investing for years in the infrastructure needed to service multiple channels simultaneously and consistently,” Newsom says.
“I would favor that position in the U.S., because land-based is so dominant. The ability to transition from land-based-only to integrated omnichannel, as a model, is something where Everi is already leading the way. While capital is not unlimited, it has been judiciously spent by Everi over a long time horizon.
“If you have not done that, and if you’re not ready for that, you will have to make a choice of where to specialize, because the pressure is going to be very high. If you are not able to take the approach that we have already taken at Everi, it is likely that you will need to make some choices to be strategically focused and capital-efficient. Then, if you if you’re in that position, you will need to align or ally with other specialists in order to provide the integrated guest experience that casino patrons will demand.”
Acres says the main point to understand is that the user interface of the future is the player’s mobile device. “Funding, loyalty, bonusing and more will all flow through mobile. Therefore, any migration to cashless becomes a new market with exponential growth potential. Cashless is the glue that holds the mobile interface together.”
Justice adds, “While new markets represent an opportunity for growth, there is still demand in more established areas. Similarly, while there are differences between commercial and tribal gaming—namely in the emphasis on iGaming and in-person gaming, respectively—there still is demand for modern payments technology.
“In fact, this is where Pavilion Payments has a clear advantage. Our solutions enable brick-and-mortar and online gaming payment operators to elevate the patron experience by providing a seamless payments process.”
Webb says his company’s MoneyLine platform caters to multiple markets. “For emerging digital operators or tribal/regional operators who are moving into the digital space, it’s an all-in-one platform that combines every major payment type, which allows new online operators to get to market quickly,” he says. “For mature operators, MoneyLine has the flexibility to offer certain features or tender types that the operator is missing to fill in the gaps in their payment stack.
“So for PayNearMe, we work with a diverse book of operators and have plenty to offer, no matter the maturity level of their online operations. The difference, strategically, is that emerging operators typically want a packaged, complete solution, while larger and more established operators may only need supplemental pieces.”
Role of Regulators
For Everi’s Newsom, the significance of regulators is “an underappreciated reality.”
“We have decades of education experience and precedence that land-based regulators have absorbed and accrued in the course of following their mandate,” Newsom says. “Many of the ones I have talked to are very interested in facilitating digital transformation—but they also take their protection role very seriously.
“Yes, they will play a significant role in accelerating as well as shaping how these changes are made. If we do not align well as an industry, then there will be a tremendous friction—and we’re already seeing it today with card schemes. Anyone who has serviced the e-commerce world can tell you, when you connect to the brick-and-mortar world, everything changes.
“The understanding that cash can walk in the door and now be played online, or funds can be moved in online and walk out the door as cash, are things that current systems and regulations are simply not well-structured to address.
“Everi has been on the forefront of working with many of those individuals and entities in trying to create a rational structure that makes sense—one that is workable, enforceable, etc.—yet, at the same time, isn’t too restrictive for entry, or specific on technology, and doesn’t open the door to fraud.
“This is a very complex area, and we spent a lot of time on education. The whole industry needs to spend a lot of time on education while working with regulators.” Justice reinforces that theme.
“Gaming regulations have always been extremely rigorous—and for good reason,” he says. “Now, in the age of digital transactions, regulators are right to raise concerns on behalf of patrons. Specifically, AML and KYC measures are of special importance to gaming operators and patrons. Pavilion Payments actually offers solutions designed to help casino operators with these very issues.”
Webb says he doesn’t believe that the regulatory environment will have a major impact on competition. “PayNearMe is committed to following regulatory best practices, while using our internal resources and expertise to help our clients navigate the complex changes in our industry,” he says.
Acres agrees, adding, “Some jurisdictions have been a little slower than others, but I think within a few months, the regulatory playing field will be even enough that the rules won’t favor one solution design over another.”
“There is a tremendous amount of pressure to be more digital,” says Newsom, “whether it’s crypto, the Federal Reserve, real-time payments or traditional banking schemes. In gaming, we’re expected to have consistent journeys across brands, whether it’s iGaming, sports wagering or traditional land-based gaming.
“I’ve seen a lot of operators and regulators say, ‘Well, until the public is demanding this, we’re not going to move’—but we know it takes years to move, once we decide to do so.
“So we need an appreciation for the speed that will be required from us to digitize, evolve, and grow services, while also being informed, judicious, and responsive. As always, if the consumer does not get what they want, where they want, how they want it from us, they can always seek their entertainment value from the markets that will do that.”