Three Reasons PA Will Have A Leg Up On NJ When It Launches Online Gambling

Steve Ruddock July 26, 2016
PA NJ bridge online gambling

When New Jersey launched its legal gambling sites on November 21, 2013, there were lofty expectations. At least in the early days, the industry ended up being more fizzle than sizzle.

During the early days, would-be players found:

  • the registration process cumbersome;
  • the technology put in place to verify their identity and location less than perfect;
  • despite its legality, most banks and financial institutions continued to decline credit card transactions, conflating legal online gambling sites with illegal offshore online gaming sites.

The lucky customers who did manage to register and fund an account were also greeted with stripped-down software that appeared to be several generations behind what the same operators were using in other markets around the globe.

The market was also devoid of mobile platforms for several months.

Needless to say, during the first few weeks and months of the industry, the New Jersey online gamblers who dealt with these issues grew frustrated and disillusioned with the industry.

Over the past three years, New Jersey regulators and operators have worked tirelessly to fix many of the technical problems and improve their product offerings.

With operators and regulators now possessing several years of experience, most people believe Pennsylvania will be able to build on the foundation New Jersey created. PA should be able to do it without going through the same growing pains and have a smoother launch than its eastern neighbor.

That’s all assuming that the legislature passes a gambling expansion as it has promised to do this fall.

Most of the kinks have been worked out

It may not have been smooth at the start, but since launching in 2013, New Jersey has done an excellent job improving, and in some cases streamlining its geolocation, payment processing, and player verification procedures, most of which are now running optimally.

Geolocation

New Jersey instituted an entirely new, and completely untested multi-layered framework for its geolocation checks. Nevada, with sparse border population, was able to use a simpler method.

There was also an insistence by state regulators and the online operators to err on the side of caution. They didn’t want to open the door for naysayers to call out the industry’s inability to live up to its promises, and prevent would-be out-of-state players from accessing the site.

Because of this, false-negatives (players in New Jersey that the geolocation software incorrectly identified as being located outside of New Jersey) as well as disconnects were an all too common problem.

These geolocation problems are now a thing of the past. The technology is reliable and effective, with false-negatives and disconnects uncommon.

Payment processing

Payment processing was an unforeseen issue.

After legalizing online gambling, operators and regulators assumed banks would process these transactions due to the express legality of these sites, and didn’t give the issue much thought as the launch date approached.

When the sites launched, they quickly realized how big of a problem this was.

In the industry’s earliest days, less than 10 percent of credit card transactions were being approved.

After a number of improvements, the success rates are now as high as 80 percent, according to several New Jersey online gaming operators.

The changes that have occurred include:

  • outreach to educate banks and financial institutions;
  • creation of new credit card codes;
  • sites forewarning customers about which banks are likely to decline transactions;
  • better educated customer service employees who can walk customers through the process;
  • the addition of alternative payment processing methods Neteller, PayNearMe and PayPal.

There is still a lot of room for improvement, but Pennsylvania’s online gambling operators will be better prepared to handle the remaining payment processing hurdles.

Player verification

Like geolocation, lawmakers, regulators and operators wanted zero margin of error when it came to player verification checks.

In 2016, player verification is as robust as ever, but most sites have moved away from collecting all nine digits of social security numbers to just the last four. The verification process is the same either way, but there is less of a mental barrier among users when it’s simply the last four digits they are asked to divulge.

Several online operators already have experience in New Jersey

With no less than four companies already involved in New Jersey’s online gaming industry — 888, GVC, Mohegan Sun (Resorts), and Caesars — Pennsylvania’s casinos will enter the online gambling age with more experience and a better understanding of the market.

Furthermore, a number of Pennsylvania casinos have added online gaming divisions and brought in industry experts to help prepare them for launch.

These operators know that “glitches” and the absence of essential software features like waiting lists and mobile platforms are going to disappoint customers. They know how hard it will be to reengage these customers after the fact.

Additionally, in New Jersey, several operators overspent on marketing early on, to a lot of the low-hanging fruit. That led to a lack of money in their marketing coffers when the market stagnated and player acquisition costs rose.

Among other things, these experienced operators will:

  • know what pitfalls to avoid;
  • better anticipate the market size;
  • have a better understanding of what marketing campaigns and promotions resonate.

Expectations will be tamped down

Finally, while it’s often framed as a failure, New Jersey’s online gaming industry has been quite successful.

Nearly three years in, the market continues to mature, and has been nearly flawless on the regulatory front.

All of this has been accomplished despite the rough rollout.

So, ignoring what the detractors of online gambling are bloviating about, New Jersey’s online gaming industry is doing quite well. Pennsylvania will do even better, particularly when you consider the New Jersey starting point.

Making matters worse in New Jersey were the irrational expectations. New Jersey operators and lawmakers expected online gambling to be a revenue panacea. When these hopes didn’t materialize, the industry was thrown under the bus and labeled as a failure — despite having put over $50 million into New Jersey’s coffers in just two and a half years.

This will not be an issue in Pennsylvania, as current projections are more pragmatic, and in my estimation, quite bearish.

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