Fantasy sports is a multi-billion dollar business that’s enjoyed significant growth over the last several years. Revenue from the Fantasy Sports Services industry amounts to $7.8bn in 2020 so far. For growth to continue, businesses must be able to accept payments through a dedicated fantasy sports merchant account.
However, few payment processors will even board fantasy sports commissioners with a merchant account to accept payments. It's not uncommon with leading aggregate payment processors to have your merchant account frozen, or shut down for good. Being forced to stop serving its customers and halt income generation is the last thing any business needs.
Fantasy Sports business owners need to know it doesn't have to be like that. Yes, the industry has challenges. But with a merchant service provider experienced with the industry, those challenges can be mitigated. Just like fantasy sports, getting a reliable merchant account isn't a gamble with a reputable high-risk merchant services provider.
In this article, we’ll touch on why accepting payments in fantasy sports is a challenge. Then cover what to look for in a reputable and experienced high-risk merchant service provider to ensure a successful partnership.
Fantasy sports is a risky business for acquiring banks and payment processors.
Banks must take many things into account when deciding the risk level associated with servicing a particular industry. They’ll consider the financial risk, laws, and regulations, even overall societal perception. Businesses in the fantasy sports arena possess all the typical high-risk factors and then some.
Highly regulated arena-
They are at once heavily regulated and unregulated, creating murky waters for banks to navigate. Some governmental regulation is clear while other times it seems like they are just flying under the radar.
The Interstate Wire Act of 1961 (the Wire Act), prohibited wagers and gambling information from being passed over the phone, and subsequently the internet.
The Unlawful Internet Gambling Enforcement Act (UIGEA) required financial institutions to prevent or prohibit the acceptance of payment for internet gambling transactions.
But the industry dodged a bullet when The Unlawful Internet Gambling Enforcement Act passed in 2006. The UIGEA included a specific section regarding fantasy sports, classifying fantasy sports as a game of skill, as long as they meet specific requirements.
This meant that because it’s not a game of chance, it’s technically legal to wager bets without Federal recourse. But this didn't make it easier for banks to service the industry.
These regulations gave States most of the control over their gambling laws. And, even now, most don't specifically address fantasy sports in their statutes.
Unfortunately, that leaves fantasy sports operating in a legal grey area as far as acquiring banks are concerned.
High incidence of chargebacks-
Fantasy sports commissioners tend to have a higher than normal incidence of chargebacks. Not only do they attract malicious fraud, but they tend to see a good amount of friendly fraud as well. Unfortunately, players don't always very sportsman-like when they lose. Often betters will file a chargeback against the transaction with their credit card company if they lose their bet.
Banks do not like to align themselves with anything that can be potentially brand-damaging. While games of skill are legal, public perception towards betting on fantasy sports can still align with gambling and the issue of problem gambling.
Potential for fraud-
Fantasy sports betting sites are a hot spot for malicious fraud. Cybercriminals go where the money is, and the target is easy. Ingenious fraudsters know users often act on emotion, getting too caught up to act carefully. Fraudsters gain access by setting up phishing websites and installing malware on fantasy sports apps. With 59.3 million users and an industry worth almost $8 billion, this is low hanging fruit for cybercriminals.
Regardless of the problems with accepting payments, Fantasy Sports betting is enjoying growing consumer acceptance.
Consumers are increasingly turning to eCommerce to conduct everyday business. We’ve also experienced increased penetration of smartphone users all across society. People are continually becoming more comfortable conducting everyday tasks digitally. Whether it's shopping, ordering services, or completing digital payment transactions, it's becoming commonplace.
People are also working from home more than at any other time. On top of working from the house, they’re generally staying home more than ever before. This just adds to the desire for digital entertainment and an outlet for boredom.
Increased internet infrastructure, greater penetration in households, and more options for fantasy sports apps have led to greater access to betting platforms. Also, Google recently updated its advertising policies lifting a ban on fantasy sports advertising.
With all this in its corner, Fantasy Sports may see a membership boom as online games and activities become more common.
Fantasy Sports can accept payments reliably with an Experienced high-risk merchant services provider.
Choosing the right high-risk payment processor will ultimately affect the reliability and longevity of your payment processing solution. Go with the wrong one, and you can quickly find yourself shut down and scrambling to find a new way to accept wagers.
Fantasy sports business owners need a high-risk merchant account provider. For a solution to be reliable, it must be a with a processor that embraces the industry. A processor that works with the industry will know about and understand the challenges this industry faces. Because of this, they have prepared to address the challenges, instead of shy away from the risks.
A reputable merchant service provider will place you with a solution where you process transparently. This way you know your solution is reliable and you can continue to accept payments and process without interruption.
A merchant account provider that specializes in high-risk merchant accounts will have the right solutions needed for the success of your business.
- Secure state-of-the-art payment gateways with shopping cart integrations fully PCI-DSS compliant
- Accept online ordering, phone orders, or recurring billing for subscription-based models
- Collect payments in multiple currencies and provides Dynamic Currency Conversion.
- Provide detailed transaction data collection and storage technology
- Robust Fraud Prevention and Chargeback Mitigation Tools
Fraud detection and Chargeback Prevention - two of the most important elements of a reliable Fantasy Sports Merchant Services.
Merchants must be proactive when it comes to preventing customer fraud. That's because card-issuing banks hold the acquiring banks responsible for their merchant's actions. Card issuing banks will charge the processing bank fines when their merchants carry chargeback ratios that are too high.
Businesses in this sector are prone to high-chargeback ratios. Processors know and accept this, to a certain extent. But if chargeback ratios get out of hand, they will have no choice but to shut down the account.
Chargeback management programs and fraud prevention software work together to help prevent chargebacks. To combat fraud, merchants must process transactions following the latest security protocols. And one of the best ways to keep chargeback ratios in check is to use a chargeback mitigation program. Visa’s Verifi, along with the Cardholder Dispute Resolution Network (CDRN) provides merchants with the best alert and prevention system offered today.
Keeping detailed transaction data that is quickly retrievable helps to mitigate chargebacks and support any disputes. With real-time chargeback filing notification, the merchant has the opportunity to settle the dispute before it goes on the record. Anytime the merchant can resolve the dispute with the customer, it’s a good thing.
However, when there is a dispute, transaction data such as dates and times of transactions, total amount, and the IP address they purchased from will help to dispute the chargeback.
Remember, giving a refund is much more cost-effective than paying the fines and fees associated with a chargeback. And that's in addition to losing the initial purchase. And it's a much better option than paying the consequences of having excessive chargebacks.
Keeping chargeback ratios under control helps to ensure the longevity of your fantasy sports merchant account.
How to get a transparent and reliable merchant account to accept payments for Fantasy Sports
High-risk businesses need to put their best foot forward when applying for a merchant account. And fast approval means you can begin accepting payments from your members quickly. For this reason, we want to help you apply for your merchant account the right way.
To expedite the approval process, we must anticipate the requirements of the processing underwriter. Our team of expert advisors will help you put together a complete package. Then we'll have it reviewed by our in-house underwriters. This way we can help you address any red flags before turning it in for final merchant account approval.
At Bankcard International Group, our goal is to provide reliable and sustainable merchant services to legitimate businesses. We’re not intimidated by the high-risk nature of the Fantasy Sports Industry. We specialize in it.
If you're ready to partner with a merchant service provider focused on your success, call us today.
It’s time to “Experience The B.I.G. Difference!”