Gambling online has become a huge success in the past 10 years. With more nations controlling and legalizing online betting, the world market is expected to exceed 257 billion dollars by 2034. Such a high rate of development has left room for innovators in the form of alternative payment providers to upset the conventional banking industry. The new fintech firms provide quick, safe, and customized services to suit the demands of the online gambling market.
In the current article, we will examine the major factors that are causing these emerging payment specialists to claim the market share of traditional banks in the online gambling sector. These dynamics are important to understand in any business that is interested in exploiting the exploding internet betting market.
Reason 1: Speed and Convenience
Among the most appealing features of online gambling is its immediate availability for placing bets. This implies that the deposit and withdrawal rates are essential to the satisfaction of players. The batch processing models applied by large banks, however, may require 3-5 days to clear payments. This is frustrating to gamblers who desire to play immediately.
In contrast, any reliable gambling payment provider for online casinos now offers close to instantaneous deposits and withdrawals. Direct bank transfers include services such as Trustly and MuchBetter to credit player accounts in a few minutes. This enables the placing of a bet almost as soon as one signs up.
The gambling business is also very much interested in the speed of withdrawal. Players do not wish to wait long before they receive their winnings. Once more, conventional bank wire transfers may be slow in sending money to frustrated punters. Such solutions as ecoPayz and Astropay allow receiving the money in the e-wallet or prepaid card within a few seconds.
By prioritizing velocity and user-friendly systems, these payment specialists align closely with the expectations of the modern online bettor. This has allowed them to gain significant market share from lethargic banking institutions.
Reason 2: Advanced Fraud Prevention
Fraud is a major issue facing the online gambling sector, estimated to cost the industry over $1 billion annually. Sophisticated criminal groups have developed methods to exploit vulnerabilities in payment networks. At the same time, operators deal with large volumes of transactions, making manual screening impractical.
Legacy banks continue to use their archaic fraud detection tools, such as blacklist filtering and basic rules-based models. On the contrary, specialized payment providers use advanced machine learning technology to keep up with the most recent threats.
For instance, Nuvei's proprietary platform utilizes behavioral analytics and artificial intelligence to analyze millions of data points. This enables more precise determination of the legitimacy of transactions than is possible by banks. Consequently, Nuvei authorizes 99.9 percent of legitimate payments and prevents fraud much better.
The advanced capabilities of these systems give the online gambling industry confidence in payment integrity. Banks using dated tools struggle to provide the same level of precision. Without innovation, they cannot keep pace with the growing ingenuity of cybercriminals targeting the sector.
Specialized providers also offer robust Know Your Customer (KYC) checks during account signup. Solutions like Pay4Fun integrate biometric liveness tests and ID verification to conclusively validate identities. This prevents bonus abuse and maintains regulatory compliance. Again, traditional banks lack offerings tailored specifically to tackle online gambling risks.
By focusing closely on the sector’s fraud problems, dedicated payment services have strengthened trust and captured market share.
Reason 3: Support for Cryptocurrencies
Another area where legacy banks are falling behind is engagement with cryptocurrencies. Online gambling and digital coins share a natural affinity. Both allow fast, borderless transactions with enhanced privacy.
The global crypto user base now exceeds 659 million people. And digital asset ownership is especially prevalent among internet betting demographics like millennials. Surveys show almost 15% of crypto investors use their holdings to gamble online.
Recognizing this synergy, around 40% of online casinos integrated cryptocurrency deposits. Leading sites offer a wide range of coins like Bitcoin, Ethereum, Tether, and Ripple to cater to player preferences. Fiat-to-crypto brokers like Simplex and Ramp allow frictionless crypto purchasing directly via gambling apps and sites.
Most of the big banks, however, have not been able to facilitate either cryptocurrency transactions or online betting merchants due to restrictive policies. They have been slow to respond to the digital asset innovation, and this has opened up their doors to more flexible payment disruptors.
The providers, such as BitPay, are quick to settle crypto payments for gambling operators and also reduce the risks of volatility. This closes the gap between what the players want and what the business wants. Once more, the reluctance of legacy banks to work with new financial technologies has lost them market.
Industry-specialized payment processors have leaned into the crypto trend, identifying and serving this lucrative niche. Their openness to emerging use cases stands in stark contrast with inflexible banking incumbents.
Reason 4: Better Risk Management for Merchants
While customers value speed and crypto options, gambling operators also have specialized business requirements beyond typical eCommerce sites. One of the most important requirements is effective risk management to handle volatile betting volumes.
Spikes during major sports events or tournament poker competitions strain operators’ liquidity. Excessive losses or fraud could cripple platforms without warning. At the same time, huge wins must be paid out reliably to maintain player trust. Banks with generic risk models are unable to account for these unique challenges.
However, dedicated providers offer tailored treasury services for betting merchants. Skrill, for example, provides a guaranteed payment buffer against player wins. This allows operators to manage cash flow effectively across unpredictable swings. Features like these provide essential stability to gambling businesses by smoothing out volatility.
Again, the past reluctance of banks to engage with betting clients has allowed new entrants to address unmet needs. Their understanding of industry dynamics enables the provision of value-added risk tools. These give merchants greater control, translating into competitive advantages for non-bank payment processors.
Reason 5: Compliance Support
There is also a growing patchwork of different regulations in various jurisdictions in the online gambling industry. It is very cumbersome to monitor the licensing requirements in hundreds of foreign markets by operators. Additionally, regulations are constantly evolving as governments attempt to keep pace with technological advancements.
However, failure to comply would attract punitive penalties or the denial of access to new regulated markets. In some countries, various forms of payment can also be restricted. This adds more compliance overhead to transactions.
Fintech providers leverage regulatory expertise and technology to help operators navigate these issues. Global Payments, for example, maintains a dedicated team tracking compliance developments across regions. Their technology also automatically filters restricted payment channels by geography, greatly reducing compliance overheads.
Again, legacy banks have lagged in providing robust and proactive compliance assistance. Their patchy understanding of internet gambling legislation leaves merchants exposed at a time of growing regulatory burdens. The specialist payment processors bridge the gap - it is easier to get into newly regulated jurisdictions and realize wider opportunities for the operators.
The Path Forward
As we have seen, conventional banks experience structural issues in serving the online gambling ecosystem. They have legacy systems and policy restrictions on their systems, which render it hard to meet the requirements of the current digital betting.
On the other hand, special payment providers recognized this gap in the market early on. They developed customized solutions for the industry with the help of advanced technology and flexibility in business models. The fintech disruptors have taken a significant market share by prioritizing the operators and players.
Innovation, a greater risk appetite, and the use of cryptocurrencies are the ways banks can compete. However, their laziness has already enabled other competitors who are hungry to establish themselves. In the near future, the world of online transactions in gambling appears to be dominated by fast-moving payment processors.
