Banks are Rejecting 50% of Transactions at Legal American Casinos

September 17, 2019 John Isaac

The number of rejected transactions hit 75 percent in 2017 at legal sportsbooks and online casinos in Pennsylvania and New Jersey. In 2018, 50 percent of their credit and debit card transactions were rejected. Of course, half is lower than three-quarters, but it’s still a staggering rate in the ecommerce market, which online betting platforms share with countless shopping sites that don’t experience this issue.

The reason: traditional banking’s continued adherence to the 2006 legislation “Unlawful Internet Gambling Enforcement Act,” which encouraged banks not to take any chances when it comes to online, gambling-related transactions.

Most Popular Payment Method: Credit Cards

Man's hand holding credit card while online shopping on a laptop computer

40% of USA transactions were made using credit cards in 2018 © Negative Space / Pexels

Intuitively, banking options are a major part of the online casino customer experience. Players often look at deposit minimums, withdrawal speeds, and payment method options when deciding between one casino or another.

That’s really what makes this transaction rejection rate newsworthy. In 2018, 40% of payments were made with a credit card and 35% with a debit card. That means banks are rejecting half of the transactions made by payments that 75% of Americans prefer. Further, the third most popular payment method is cash, which is typically not an option at an online casino.

In a press release published on Business Wire, Mike Raffensperger, CMO of the highly popular sports betting platform FanDuel Group, said: “We became the number one sports betting operator in New Jersey by focusing on the customer experience.”

Recognizing the issues customers were facing with more mainstream payment methods, FanDuel added PayPal to their banking options. That’s not to imply their unmatched popularity is thanks to this shift, but it was implemented as part of a larger goal to optimize the site’s UX at every level. Still, e-wallets like PayPal make up only 3% of consumer transactions in 2018.

What Is an Alternative Payment Method?

A standard payment method is a mainstream debit or credit card offered by American Express, Visa, MasterCard, or comparable company. An alternative payment method is simply an alternative to those options. Examples include e-wallets like PayPal and Skrill, mobile wallets like Venmo, pre-paid cards, and even cryptocurrencies. In total and combined, alternative payment methods make up less than 10% of the American payment method market.

A Lesson from Offshore Casinos

Online casinos based overseas (or even in Canada or the Caribbean) accept players located in the United States. But they’re not technically legal. Instead, online gambling enforcement targets operators located inside the United States, not citizens who choose to bet with offshore operators.

Still, those transactions should generate the same suspicious activity detection to that of local online casinos. But such is not the case, because the online casino changes the name of the transaction in the digital records to a more discrete name, one that won’t get flagged and rejected. Unless the transaction amount is unusually high, American depositors at popular offshore operators have few problems when it comes to deposits or withdrawals.

So, beyond simply adding alternative payment methods, a local online casino could do something similar, especially since there’s nothing illegal about the transaction (despite banks’ overly-cautious flagging). Statistically speaking, it would improve the user experience as well as open betting to folks who gave up on the online casino or sportsbook because their card was rejected. Frankly, with 75 percent of consumers prefer credit and debit cards, it may be essential.

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