Financial Experts Warning to the iGaming Industry

Dante · Nov 28, 2003

Finance UK have reported that the iGaming industry is particularly vulnerable to payment fraud following a report by Consult Hyperion. The IT consultants warn that fraud constitutes a threat to industry growth greater than any “moral, regulatory or tax concerns”. The problem, they say, lies in the reliance on credit cards as a method of payment. Finance UK explain: “When credit cards are used for online gambling, the transactions generated are categorised as card not present (CNP) transactions, a category which has become the fastest growing sector for fraud in the card payments industry.“

Dick Clarke, consultant with Consult Hyperion says: 'The failure to handle online payments securely and efficiently could have a severe impact on the online gambling sector in the future.”

While APACS (Association for Payment Clearing Services) and the British Retail Consortium have jointly issued a guidance document to help combat CNP fraud, the experts say this will not be enough. In the wake of news that sites are being held to ransom by the Russian Mafia, it seems that the iGaming business is strewn with pitfalls...@@

GringoinCR · Nov 28, 2003

That could be why almost no one uses credit cards. Been like that for many years.

Cash is king.

Glaken · Nov 28, 2003

I have to agree with the Gringo in CR. I have never used a Credit Card for a deposit and only a Debit card once.

The way to stop CC fraud is simple; if you don't have the card present with a matchable ID your done. In the IT biz if you can't e-mail or fax both sides of the card with both sides of the ID your done.

Go somewhere else.

CNP = Cash Not Present.

Integrity, Honesty, and alot of Humility in this biz.

Had Turkey yesterday and will probably have Crow on Monday.

WildBill · Nov 28, 2003

I have started to wonder, now with a handful of pre-loaded debit cards hitting the market, why haven't they become a part of the sending side of the equation? Do book operators see them being part of the money system in the near or medium term?

Glaken · Nov 29, 2003

That is an excellent question!

I guess you can buy them without giving any personal ID info, kinda like pre-paid cell phones.

I would think that using the Visa or Master Card logo they would be issued by the smaller eqity banks since the larger ones don't really need this market (or maybe they should look at this since according to E-loan 67% of thier customers would not have a beacon score that would qualify for an un-secured card).

How long before we can by a tempoary IP address?

waw · Nov 29, 2003

Not sure about no-one using them, we've got a significant proportion of our players on cc. Its just convenient, I suppose, and without painful charges.

GringoinCR · Nov 29, 2003

waw, wait until you start getting the charge back reports in, $50k - $70k.

Many times it is your processor that is making up the charge backs and keeping the money.

But if the convenience out ways the painful charges, enjoy. I'm just letting you know what is coming down the road. Notice, none of the books that have been around since the beginning still use them? Ever wonder why? Since they should have the largest list of money options???

waw · Nov 29, 2003

Gringo, I absolutely understand what you mean about CB's. It is just that we still take a big chunk of people with CC. CB's is a problem, but a bigger one for us is getting the damned deposits through. Finding an good uncoded processor is getting HARD!

If players want to use CC's then we will try to offer it without exposing ourselves to too much risk/cost. I do accept your point of view though.

Glaken · Nov 29, 2003

What are the rates on uncoded processors?

Just curious

waw · Nov 29, 2003

Glaken, I can only speak for the ones I've seen, but they are comparable to coded, maybe a little more. Of course, if someone offers an uncoded solution that gets you good acceptance rates AND can be trusted to treat you and your players well then any premium they request is probably worth it.

Glaken · Nov 29, 2003

Sounds about right; I don't see anyway to lose money this way, do you?

G

waw · Nov 29, 2003

The problem is when the uncoded processor gets coded. THEN you have a problem as it is very difficult to return cash to the cards, as it normally won't go through.

You then have to find another way to get money back to the players concerned, which can leave you vulnerable.

Phaedrus · Nov 29, 2003

Actually, as of 1 October it is no longer possible to get a Visa/MC debit card without an ID. You can buy gift cards and other similar low-value, one-use items without ID, and in some cases cards that run on the secondary rails (Cirrus, Maestro, STAR, Pulse, etc.) but not Visas and MasterCards.

There are a handful of places left in the world where there will be exceptions to this, but VISA and MasterCard have already started phasing them out globally.

What they do not get, or more to the point what legislators and consumer advocates do not get and professionals are tired of trying to explain to the ignorant, is that the more information is universally required to obtain a given financial service (bank account, debit card, etc.) the easier it is to defraud an institution, not harder. But trying to explain this to the average government agent or consumer advocate is like trying to explain why squares bet overs to my dog.

If the gaming industry wants to protect itself from chargeback fraud, they need to use methods of payment that do not allow chargebacks. That simple.

Phaedrus

waw · Nov 30, 2003

Good point, Phaedrus! I would love to be free of cc's, but sadly, we have too much demand from players! We offer bonuses and comps, but still a huge number of them want to use cc's.

I am sure that with time, and pressure from the US, players will eventually shift to alternative payment methods. Why would anyone want to use a payment method where you have to try over and over again to deposit?

WildBill · Nov 30, 2003

Question is though why won't debit cards work well in this business? Supposedly the reason why CCs are so hard to use is that there are so many state laws making gambling debt unenforceable. A debit card transaction isn't a debt, so it shouldn't be covered. I can see the issue with chargebacks, but the lawyers for these weasels are going to have to push another argument if they want to help them get out of their obligations if it is made on a debit card.

Phaedrus · Nov 30, 2003

The problem is that a Visa credit card and a Visa debit card do not "look" any different to a processing terminal. This is not likely to change in the future unfortunately. When Visa came out with the Visa Check Card in 1995 they essentially screwed the whole debit card industry, because most consumer resistance to debit cards at the time were centered around the fees charged for cards running on the secondary rails.

A Visa/MC debit card has the exact same liberal chargeback policy as their credit cards do, so it's not a matter of "getting out of a debt." There are so many online payment systems that do not allow chargebacks it is ridiculous that they cannot get broad support by books.

I understand that the market works against a book in a situation like this -- if one book doesn't accept a creit card and another does, then a client might opt for the easy way and use the book that does. But given the high (and rising) fees of online merchant accounts, the high (and rising) incidence of cc chargebacks and fraud on the whole, and the fact that Visa/MC themselves do not want books using their service for funding, it is only a matter of time before the industry is going to have to deal with this issue and explore other options.

Phaedrus

waw · Nov 30, 2003

I could not agree more!

However, there are no really good solutions for all parties. Neteller is good for the book/casino, but bad for the player (insane charges), PrePaidATM would seem to be good for everyone except the systems suck and a lot of players don't really understand/trust it, many of the ecash prcessors can't be trusted, WU are turning operators off and moving out of the industry (gaming) and echeques are a total fraud nightmare!

I look forward to the day that the industry comes together to adopt standards that are affordable, resistant to fraud, quick and easy for players and are ultimately trustworthy. However, until that day, CC's are still going to be a hugely important part of any operator's business.

Phaedrus · Nov 30, 2003

e-gold

Established for over seven years.

Over $ 20 million in accounts.

Accepted by thousands of online merchants.

Can be loaded to at least a dozen available third-party debit cards for purchase/ATM use.

Is backed by and redeemable for gold.

Is non-repudiable; i.e. chargbacks are not even possible via the terms of service.

No identification or "verification" of account neccessary.

Available in every country in the world without prejudice.

Zero fee to send money; 1% up to a maximum of $ 0.50 per transaction to receive money.

1% per year account fee, computed and charged monthly (1/12 of 1% of your average daily balance for the month.)

MegaSB is about the only book that accepts e-gold currently. It has caught on a little better with online casinos. You might contact MSB for some insights into how they enjoy working with e-gold.

Phaedrus

waw · Nov 30, 2003

Whats the merchant fee looking like on this?

Phaedrus · Dec 2, 2003

waw

If you mean something akin to the discount rate charged by credit cards, it is 1% up to a meximum of $ 0.50 ... so, I send you $ 50.00 and you are charged $ 0.50 ... I send you $ 50,000.00 and you are charged $ 0.50 .

Phaedrus