Online gambling merchants are some of the most high risk business models out there for banks. As such, online gambling merchant accounts are hard to come by. The reputation risk of being associated with gambling along with heightened fraud and money laundering risks can alienate major mainstream banks and credit card processors from offering a merchant account at affordable rates for the industry. Banks do not wish to be associated with a market that includes such high rates of chargebacks. Because many gambling merchants operate at a global scale or are headquartered abroad, they fall under a legal gray zone which just does not pass muster with a bank’s compliance department.
Some merchant account providers have come up with customized solutions for online gambling merchants who need to process credit card transactions. Although there are myriad options available in the market for providing the services of a merchant account, an online gambling company must assess and evaluate all the alternatives available taking in consideration the specific business needs. Major factors to be considered before starting a relationship are:
- Rates: Gambling Merchants would need to fork out a much higher rate as compared to other businesses. Rates range from 5% to as high as 10%. This fee is a direct hit to the bottom line.
- Settlement Time & Rolling Reserves: Will they settle the transaction within 3 days or 15 days? Does the provider require you to keep a minimum reserve? These are essential questions that online gambling merchants need to know the answer to before committing to a provider.
- Banking Partners: Is your bank connected to multiple banks and associated financial institutions? Managing how your merchant account is set up is vital. Hiccups can cause disruption to the end customer, leading to loss of business.
The space for payment processors who specialize in high risk merchant accounts has become crowded and it’s more important than ever for online gambling merchants to vet their options. This means evaluating all vendor options across a wide set of criteria to ensure the best fit for their business model – and their bottom line.
When researching online gambling merchant accounts, merchants should look to deal with payment processors with no or low application fees, state of the art payment gateway solutions and a comprehensive fraud prevention tools. Some payment processors also offer chargeback management solutions and multi-currency, which is critical for online gambling merchants who often operate globally.
Online gambling merchant accounts require several steps to become fully operational:
Bank account: Opening a business banking account is step 1. Companies are typically required to submit banking statements for the last 3 months. In cases where no banking statements are available (for startups), then the bank may require personal account statements for the last 3 months from the guarantor of the business.
Professional Reference: The company usually has to submit at least 1 professional reference which signifies business is in good standing and is regular with payments. This reference should not be older than 3 months and merchants should note that these are verified.
Executive Summary: The online gambling company has to submit a letter giving the exact description of the business and its operations. The company must furnish a detailed payment processing report stating the breakdown of chargeback, refunds, total sales and other financial details.
Time for Application approval: The processing time for opening merchant account usually takes 5 business days to 2 weeks. This varies widely, especially for high risk merchants.
Fees: Some payment processors require application fees for filing the application, and these can surpass $500.
Stability, security and scalability are essential for online gambling merchant accounts. As with all e-commerce merchants, the ability to process payment cards securely and without interruption, is life or death. Choosing the right payment processing partner is an important decision that requires research and footwork by the merchant. Signing on with the wrong provider can lead to merchant account termination or mounting hidden fees. Neither scenario is desirable. It’s important to find a payment processing partner who will set you up for success from day 1. Online gambling merchants should do their homework and choose the partner that offers the best combination of service and tools to fit their unique needs.