Monday, May 27, 2024

    EDITORIAL Does the end of credit card for online and mobile gambling mean DCB’s time has come?

    News this week that the UK’s Gambling Commission has banned the use of credit card for all gambling services looks like a body blow to the gaming industry. But could it be a boon for direct carrier billing (DCB)?

    The online and mobile gaming sector has boomed for the past 10 years and, as more consumers have gone mobile, on-the-go gaming, sports betting and more have blossomed. Much of this growth has been driven by credit card payments – not least because it is the easiest way to get money into the online world.

    However, according to the Gambling Commission, 22% of online punters using credit cards are ‘problem gamblers, with even more suffering some form of gambling harm’. Hence, from 14 April, their use for gambling is banned.

    Gambling Commission chief executive, Neil McArthur, said the new regulation should “minimise the risks of harm to consumers from gambling with money they do not have”.

    He added: “We also know that there are examples of consumers who have accumulated tens of thousands of pounds of debt through gambling because of credit card availability. There is also evidence that the fees charged by credit cards can exacerbate the situation because the consumer can try to chase losses to a greater extent.”

    The gambling world has been, of course, rocked by the news of the ban – which takes effect on 14 April, after the Grand National – but could this be a massive opportunity for direct carrier billing (DCB)?

    Gambling companies have long used carrier billing as an on-boarding mechanism, using it to allow people to engage in mobile gambling on the fly without an account – and they sign them up to a subscription service or get them using credit card once they are bedded in.

    Let’s face it, the gambling isn’t going anywhere, so something will fill the credit card shaped void, a view shared by Jens Bader, co-founder of iGaming payments company, MuchBetter.

    According to Bader: “The Government’s long-awaited credit card ban raises more questions than answers. Most importantly, will it actually work in the real world? There are so many payment options available to players, that banning credit cards may not have the desired effect and protect the people it is designed to protect.”

    This is precisely why credit card may not be so sorely missed. “From an industry perspective,” he adds, “it will be relatively simple for gaming operators, payment companies or credit card operators to introduce new controls once the ban comes into force. This isn’t an issue of great technical or logistical complexity.”

    One of these solutions is going to have to be DCB. “DCB offers a concrete solution, it is a responsible gambling centric product as a payment cap of €50 per transaction and, in accordance with PSD2, an additional monthly limit of €300 is set whilst tackling the pain point age-verification at the same time,” says Charlotte Newby, Head of Corporate Communications at DIMOCO. “A great alternative payment option for operators now looking for alternatives, it is a solution literally every punter already holds in hand.”

    It also fits in with what the Gambling Commission wants. The small print in the Gambling Commission’s report suggests that there is nothing wrong with using carrier billing. Paragraph 3.82 of the Commission’s ruling says: “We do not expect a ban to prevent the use of credit cards for gambling by wholly indirect means [the italics are mine – Ed]– for example, we acknowledged in the consultation that individuals intent on obtaining gambling funds from their credit cards could use those cards to withdraw money from a cashpoint. They might also try to load funds onto a pre-paid card via a credit card transfer or indeed through money withdrawn from a cashpoint via credit card”.

    ‘Wholly indirect means’ legitimises the use of credit card to pay a phone bill where gambling has been paid for. It also makes it ok to use carrier billing to pay to play.

    Another analogy comes from the world of supermarkets. Again buried within the Commission’s ruling, it says: “We acknowledge that National Lottery and society lottery tickets and scratchcards can be bought in supermarkets and newsagents along with other products. It would be a disproportionate burden on retailers to identify and prevent credit card payments for lottery tickets if they form part of a wider shop. National Lottery retailers are trained in preventing excessive play and National Lottery draw-based games have the lowest problem gambling rate of any product at 1%”.

    On the surface, then, it looks like the credit card ban in gambling is a boon for the carrier billing market. It fills the void and has caps on it that will make problem gambling less likely with DCB users – it could well be a ‘clean’ alternative.

    However, there are still many unknowns. The spotlight on consumer protection that the Gambling Commission’s credit card ban directs at gambling isn’t going to go unnoticed by carriers. It could be argued that they are providing credit – directly and indirectly – to fuel problem gambling. Given the history of carriers and carrier billing, this is something they are not going to want to be involved in.

    MuchBetter’s Bader agrees: “Carrier billing on post-paid contracts ultimately represent a credit line as well. However, due to high payment costs of carrier billing to operators, they usually only use this option mostly for customer acquisition to get people quickly depositing with little friction. So, most operators would not want large amounts/volumes on carrier billing – pricing is prohibitive,” he says.

    But it may be possible, thinks Elson Sutanto, senior analyst at Juniper Research. “Of course, mobile operators will have a responsible part to play in ensuring control over the amount spent, and frequency in which DCB is used by smartphone users, particularly the youth segment, for gambling purchases. The question is what does this control look like? Is it standards that have to be determined by the Gambling Commission, the Gambling businesses/operators and the telecom operators themselves?”

    Sutanto continues: “For the gambling commission, there is needs to be significant thought around how to regulate/oversee spending on gambling via DCB and by which type of consumer in terms of demographic. Also, this could be in the form of limiting the amount of spend per day, or to limit/stop top ups for gambling if these top ups/transactions exceed a certain amount, or are done a certain number of times per week. This approach could be used to determine and tackle ‘addiction’ to gambling.”

    MuchBetter’s Bader adds: “I personally do not see too much of an issue here. A post-paid mobile bill needs to be repaid within 14 days usually. People are dependent on their phones and being reachable- they won‘t endanger that by ramping up large amounts on their bills and then unable to pay back. And last but most important, carriers have sensible limits in terms of what they can bill for 3rd party services each month.”

    Only the next few weeks will see what happens. Carrier billing has a huge – and growing – role to play across the gamut of digital services, including gaming, so it would make sense to see it only benefit from this move. However, there are many other opportunities for DCB that may or may not be harmed by any fall out from gambling. My feeling is that it should just join all the other ways of paying – people will gamble no matter what barrier you put in the way and it can only be a win for carrier, billers, gambling providers and consumers.

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