The lack of credit card acceptance is one of the biggest complaints about regulated online poker in Delaware, Nevada and New Jersey. The Mastercard acceptance rate at regulated sites is higher than Visa, however, neither are high enough to be considered adequate for players and operators. Many U.S.-facing offshore sites accept Visa. This may cause players to deposit at an unlicensed site if the transaction is declined at a regulated one first.
Card issuers have the right to block any transaction that the company does not consider legitimate. Online gaming transactions, even if explicitly legal, sometimes fall into this category.
Credit card companies have fears that date back to last decade. These banks faced a wide variety of fraud processing payments for online poker rooms and casinos. This included losing players claiming that charges were not made by them and fraudsters stealing credit cards and creating fake accounts in an attempt to turn stolen plastic into cash.
Some issuers were the target of gamblers that tried to hold their banks accountable for their losses even though the players admitted making the transactions.
None of these will be a major issue in the regulated online gaming market.
Operator and bank protection created by regulated markets
Losing gamblers discovered how easy it is to scam offshore gaming sites after losing a credit card deposit. A call to the credit card company would erase those losses instantly. A player could initiate a chargeback by claiming that he did not authorize the payment.
The site would have little recourse if a chargeback was filed. The transactions were often miscoded as internet merchandise sales so that the banks would approve them. The merchant would be unable to prove delivery because the product never existed. The site would then be unable to collect from the player because of a lack of access to the U.S. court system, law enforcement, and credit bureaus.
Chargebacks are expensive for banks. These costs are passed onto merchants and processors in the form of penalties and higher processing fees. Banks loathe chargebacks and online gaming has been associated with too many of them over the years. This is one reason credit card companies are not quick to approve these transactions.
This concern is resolved in regulated markets because players cannot easily chargeback a credit card transaction. The transaction is coded as a legitimate, regulated purchase. Many are considered cash advances. The poker site can prove where the player was located at the time of the transaction and that the chips were received. Proper player verification also provides evidence that a charge was proper.
Players that manage to pull off a successful chargeback could still be subject to civil and criminal action. Regulated sites will have easy access to collection agencies, credit bureaus, law enforcement, and civil courts. This removes any incentive for players to try and defraud the system.
Credit card thieves will be less inclined to try and scam sites that run identity checks and know exactly where a player is located while seated at the tables. A credit card scammer would also need a victim’s Social Security Number to help complete the process. Other personally identifying information may also be required, including previous credit accounts and addresses. A cell phone to help locate the player is needed, too. Fraudsters are not likely to have access to all of the information needed to open an account at a regulated site.
If a scammer manages to get through the player verification process, there are other internal processes that may catch him in the act or prevent the funds from leaving the system through a partner’s withdrawal request. Even if successful, there is still a digital trail that would lead investigators to the criminals.
The fact that regulated sites have access to law enforcement will not only be a deterrent, but will also allow for criminal penalties to those that get caught simply attempting this type of fraud.
Little threat of lawsuits from losing gamblers
Some gamblers tried to get out of paying credit card bills by suing banks, alleging that illegal gambling transactions are not enforceable or that states do not allow credit for gambling. This type of action will be difficult, if not impossible to win in a regulated environment. That fact will discourage most from attempting it, especially since these types of cases were dismissed even before regulation.
Banks are conservative businesses. These corporations want to avoid the expense of defending lawsuits and chargebacks, even if the business is legal. This is why most credit cards were declined years before the UIGEA was enacted. At some point, these institutions will associate regulated online gaming with any other online purchase. Unfortunately, we are not at that point yet.
It will take more states regulating online gaming to help make banks more comfortable with the industry. This will also help the profitability of processing these transactions, another motivating factor.
Online poker and casino players will eventually demand that banks approve their transaction or customers will be lost to credit card issuers that will. It is time for banks to see that and create internal policies that address this pressing issue facing the regulated online gaming industry.