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Total Transactions

How payment processors are bypassing banks and credit cards

Total Transactions

Don’t tell major vendors that online gaming exists only in three states. They envision an imminent revenue avalanche in the heavily populated gaming states of California, Pennsylvania and Connecticut. It is only a matter of time before those states go online, forecasts indicate. The bevy of tribal entities further enhances the projections in those states.

Companies position themselves ahead of state legislatures. When the door opens, they want to fly through with new products, solid relationships and the instant ability to greet the market.

For some, that means buying other companies. For others, it means upgrading technology. For all, it means figuring out what they do best.

Online gaming revenues have fallen short of lofty expectations. But the vendors who serve this multibillion-dollar industry believe that a multi-use for their products, coupled with the easing of fraud concerns, will produce a lucrative environment.

Billions and Billions

Vantiv utilized education and integration to forge a gaming presence.

The Cincinnati, Ohio-based company has long been a transaction processing giant. It handles 16 billion transactions and more than $600 billion in card volume annually. The powerhouse outfit services Wal-Mart and CVS, among others.

Gaming recently entered the lineup.

The education? Joe Pappano, the senior vice president and managing director of Vantiv Gaming Solutions, had long prepared for gaming to join Vantiv’s arsenal. He spent several years researching the future of gaming and awaiting its online placement before committing company resources to it. Pappano forecast the advent of social gaming, fantasy sports, advanced deposit wagering and the evolution of internet gaming.

By the time iGaming materialized last year, Vantiv had laid significant groundwork with operators, banks and vendors. Years of analysis created an optimistic forecast of how this new market would behave. Vantiv immediately became prominent.

The integration? Among other moves, it became an investor in Sightline, which brings casino and card operators into Vantiv’s transaction world.

“We want to be the company that controls the last mile,” Pappano says. “What we have is the ecosystem so that if somebody wants to use a card to fund his gaming purchases, we will provide the connectivity to allow that transaction to occur. We also provide a lot of back-end reporting.

“We are bringing all legs of the stool together. Somebody may want to go online to play. Somebody may wish to use a mobile device. Somebody has to want to have a transaction in the casino. Whether it is online, mobile or the brick-and-mortar structure, we have the infrastructure to allow an operator to follow its customers. We connect all points of interaction.”

And those points look greener by the day. Pappano says the American market is ripe for a financial bonanza when more jurisdictions bring games online. He says $4 trillion was used on debit, credit and prepaid cards in the United States in 2013.

“More than any other country in the world, the United States has shown an appetite to use the card. It correlates well with gaming. The transaction is clean, succinct and card-driven.”

A new era has only begun.

“With three states operating online domestically, you have less than 3 percent of the population involved,” he says. “When Pennsylvania and California go live, which we could see in 2015, you will have close to 20 percent of the U.S. population able to game online. That will be a monumental shift. We are just scratching the surface. I have not seen anything like this in my 22 years here.”

Pappano says that with gaming already being highly regulated, the trust factor for online transactions continues to grow.

One of Vantiv’s partners, Sightline Payments, has combined hustle with muscle.

The muscle, of course, is Vantiv. The hustle aspect for Sightline is its growing relationship list with casinos to utilize its general-purpose, reloadable card. Borgata and Golden Nugget became partners with Sightline early in New Jersey’s online gaming era. Sightline enables a property to send a prepaid card with its logo, etc., to customers who have funded the purchase online.

“You can be sitting in New Jersey 50 miles outside of a casino and be playing online in just a few minutes,” says Omer Sattar, co-founder and executive vice president of strategy for Sightline. “You can fund the card online and go right into Borgata’s iGaming network, even though you may not receive the physical card for a few days. This is a bank-issued card, protected like any other card and good wherever Discover is accepted.

“Now let’s say you have played online, you initially put $500 in, and now you want to take your wife out to dinner. Normally, you would have to go down to the casino cage and get, say, $200. But now you can control the funds on your mobile app or online gaming station. The cash-out is available in real time on your card. All customers want their money, and we give it to them, right away.”

Sattar says Sightline shares the interchange money—the fee card issuers make on transactions—with casinos. This makes the operators more of a partner in the game and likely to gain more familiarity with their players.

“I just spent $1,000 on a camera using my Borgata prepaid card,” he says. “Now the casino can see that I like photography and perhaps they will want to give me a discount at my favorite store the next time I come in and spend $200, etc. The casino gains interchange money from my company and the customer can get reward points from the casino.”

Sattar expressed excitement over Nevada deciding in February to allow the use of a prepaid card in conjunction with a cashless wagering system, to move money into and out of slot machines. For Sightline, that resembled a drilling company finding another oil well. Large tribal casinos on the East and West Coasts are the likely sites.

Everi-body In!

Global Cash Access is branching out. Again.

The Las Vegas-based company already owns a dominant market share of the North American land-based cash-access market, being licensed in over 150 gaming jurisdictions. GCA generates more than $20 billion in cash distributed to gaming patrons, and processes over 90 million transactions each year through its land-based operations. It jumped into the lottery market through an agreement with Scientific Games Corporation to provide U.S.-based lottery clients with payment services and integrated digital wallet functionality.

Last August, it spread tentacles deeper into the gaming world. It launched Everi, an innovative payment and monetization solution geared toward the emerging online world.

“We want to see casinos in states like California implement the infrastructure with our data,” says Tim Richards, the general manager and senior vice president of interactive solutions for GCA. “We want to see them accumulate player data, use the information to build wallets and set the seeds to graduate when iGaming comes online. You want this piece in place. You want the systems, you want the managing of the player account.”

Everi was designed to bridge the payment gap between land-based and interactive gaming, integrate seamlessly with GCA’s extensive network of kiosks and land-based operations and reduce operators’ PCI burden.

The product suite has several components. The payments portion includes a straight-through system that consolidates numerous options into one simple-to-integrate payment wall. The digital wallet is a funds management and payments solution, managing real money and social currencies while bridging disparate game and loyalty systems. The productivity suite focuses on increasing revenue through player demonetization and includes detailed reporting, player and transaction analytics along with customizable offer engines.

Operators can utilize Everi via software or kiosks in the casino, Richards says. It can assist customer promotion and help conduct the actual online game.

“With a casino, we can explain that a wallet combining internet gaming, mobile gaming and sports, etc., is ideal, and it is different than just providing a payment mechanism,” Richards says. “We combine this with everything they are doing. It is an extension of their loyalty program.”

Richards believes customer security continually improves in the American market. Casinos can check databases. Technology, with the advent of geolocating and Wi-Fi triangulation, can pinpoint customer locations via IP addresses or cell towers, Richards says.

The American bases have become more reliable against fraud than their offshore counterparts, he says. As this lucrative market flourishes online, unique opportunities arise.

“Most analysts initially said that because Europe sees 12.8 percent of its gaming coming from the internet, the United States would realize almost 13 percent of $60 billion annually,” Richards says. “We’re not seeing that yet, and in fact there has been a decline in New Jersey, but that’s not a horrible thing. Overlooked in the 12.8 percent European number is a lot of sports betting that is mobile and online. The United States only has sports betting in Nevada. You have to look at those numbers in a more detailed manner.

“If I am an operator, I’m thinking about all these innovating companies that offer head-to-head wagering and different types of play not available on the casino floor. It is skill-based play. It is exciting. And it is not taking up any space on my casino floor. If I earn a little less money than I previously thought and I have a lot more people playing, that’s very interesting to me.”

Richards is hopeful that Visa will implement a new merchant category code specifically for iGaming, before the end of the year. This would ultimately put more money in the iGaming system. By Visa effectuating new MCC and iGaming-related rules, payments will be consistent and reliable across all card-issuing banks.

Covering The Bases

For Las Vegas-based Ditronics, it is time to up the ante. The company already has an online presence handling nearly $3 billion annually. While Ditronics has long specialized in in check cashing, ATMs, kiosks, etc., and provided services to 450 casino operators, it is now in line for online.

Online gaming becomes an unofficial “hedge fund” for this company. Ditronics offers operators both a marketing-based wallet and an important safety measure for online play.

“It’s still early in the game, and there is not enough critical mass to determine what type of revenue online gaming will provide the industry,” says Jim Kirner, senior vice president of sales and marketing in North America for Ditronics, “but we have solutions ready for them.”

The Ditronics MCF Platform is an integrated suite of hardware, software and programming APIs that allows operators to provide patrons an eWallet solution to enable funding of play across multiple gaming channels. They include in-room, online, mobile, sports and gaming floor from a single, shared virtual account.

The company provides an enterprise-wide cash access and funding platform (MCF) for gaming operators who require traditional cash-access services as well as a solution that organically extends to online and mobile gaming venues with a single point of reference for players—the digital wallet. The wallet provides player-centric access to funds wherever the operator has provided a “venue” for gaming activity to take place. Players can fund their wallet for online or mobile play both inside and outside of a casino.

The wallet allows patrons to securely enter their financial instruments for quick transactions from any browser-enabled device—PC, tablet or smart phone. Built in know-your-customer (KYC), fraud detection and patron-configurable velocity limits ensure that the operator maintains compliance. Both the operator and patron are protected against fraudulent or excessive activity.

The compliance issue has become more complicated than operators originally thought, says Brian Bullard, chief technology officer for Ditronics.

“What we have recently seen with the Target breach, for example, is that high-profile financial data is susceptible,” he indicates. “Banks are getting more strict in how the data is transmitted and ultimately stored. Two years ago, when online gaming came out, the platform providers believed they were going to handle all of this. They very quickly realized that data processing is not as straightforward as they had anticipated. The bottom line is that this is where we excel; this is our specialty.

“What we try to do is keep the operator out of that end of the business,” Bullard says. “We assist with the investigation with the card issuer in the case of a charge back. In some cases, we will guarantee payments to the operators.”

Ditronics sits between the operator’s site and the processor and applies needed compliance, verification and validation to each individual transaction in real time. It also guarantees payment to the operator. Ditronics assumes liability for all disputes, charge backs, NSF checks and other compliance requirements.

The compliance help, coupled with an updated wallet and technology spanning the online and brick-and-mortar spectrum, gives operators an edge, Kirner says.

“In a brick-and-mortar setting, you can lose a customer in maybe 15 minutes,” he says, “but online, you are just one mouse-click away from that. So how does an online casino differentiate itself from the bad guys trying to take away its customers? How does Jimmy as an operator provide the same experience to his customers off site? How does Jimmy market to those players?

“The wallet gives him a 360-degree view of his customer, which is extremely important now. I read one report recently that in Las Vegas the revenue from outside the gaming floor is 75 percent of the total. That’s the spa, the shows, the restaurants, hotels, etc. The wallet helps keep an eye on your player and helps the operator keep all of those

dollars inside of their four walls.”

A Net Solution

Another company coveting the expanding U.S. market recently made a big play. Montreal-based Optimal Payments, a leading global online payments and risk management provider, announced its acquisition of two strategic companies for roughly $225 million on July 1.

The purchase of California-based payment processing entity TK Global Partners LP (known as Meritus Payment Solutions) cost roughly $210 million. That is $150 million in cash and $60 million of Optimal Payments shares. Another $15 million will bring in the trade and assets of Global Merchant Advisors, Inc., a U.S.-based online payments company. Closing of the acquisitions is expected to occur early in the third quarter of 2014.

“The U.S. market represents the single greatest expansion opportunity for Optimal Payments,” says Joel Leonoff, the president and CEO of the company. “After careful evaluation of a number of potential candidates, Meritus stood out as the perfect choice on all fronts. I am very excited about the combination of our businesses, which immediately accelerates the group’s growth opportunities and accomplishes a stated key strategic goal for us.”

Optimal Payments is a global provider of online payment solutions. It operates in more than 200 countries and territories, moving and managing billions of dollars each year. Merchants use the Netbanx platform and services to simplify how they accept credit and debit card, direct from bank, and alternative and local payments, and the Neteller service to increase revenue and capture new customers. Consumers use the multilingual and multicultural Neteller and Net+ Card stored value offering to make secure and convenient payments.

In this sector of casino supply, vendors are poised for a huge leap in business. All it will take is a few more iGaming states.

And that’s coming.

Casino Connection Sports Editor Dave Bontempo is an award-winning sports writer and broadcaster who calls boxing matches all over the world. He has covered the Philadelphia Flyers in the playoffs, as well as numerous PGA, LPGA and Seniors Golf Tour events, and co-hosted the Casino Connection television program with Publisher Roger Gros.

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