Neteller Return A Boon For US Online Gambling Industry

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Wednesday, March 5th, 2014 | Written by Shane Larson

Almost seven years after the US government accused Neteller of running afoul of the UIGEA and forced the online payment processor to withdraw from its marketplace, the UK-listed company is now looking to make a big return to the States after Optimal Payments Plc, the parent company of Neteller, announced it has made an agreement with a “federally-insured financial institution sponsor.” As Optimal Payments CEO Joel Leonoff, explains:

“The NETELLER service and the Net+ Card being launched in the U.S. are brand new services that have been developed to meet the unique needs of the U.S. marketplace. With our U.S. financial institution sponsor, we are leveraging NETELLER’s flexible deposit and payment options and with our expertise, resources, and management are offering something truly unique in the U.S.”

Neteller was e-wallet of choice during US online poker boom

When online poker was booming in the United States in the early 2000’s, Neteller presented one of the easiest methods for poker players to transfer funds in and out of their poker accounts, and the company was considered the e-wallet of choice for Americans. The simple procedure involved players linking their Neteller account to a bank account, and after funds were transferred to their Neteller account they could be held there until needed for an online deposit, which was then instant.

Unfortunately, after the UIGEA passed in 2006, Neteller was one of the first companies targeted by the U.S. government and in 2007 the business’ two founders Stephen Lawrence and John Lefebvre, were arrested on charges of conspiring to illegally transfer billions of dollars to overseas companies. An agreement was eventually reached with the US government, but Neteller officially exited the U.S. market and having posted revenues of $239 million in 2006, the company’s revenues declined to just $44 million by 2010.

Neteller already operating in US internet market

After the Unlawful Internet Gambling Enforcement Act was reinterpreted in 2011 to allow for state-by-state legal online gambling, Neteller’s owner Optimal Payments plc struck a partner relation with Caesars Interactive Entertainment and Bally Technologies designed to create inroads into the newly developing regulated online gambling markets. Since then, Optimal has already been processing money in two of America’s regulated internet wagering markets, including Nevada and New Jersey, where the company services BorgataPoker.com and NJ.PartyPoker.com.

Following news of Optimal Payments’ deal to provide its processing service to the United States, analysts have become bullish on the firms prospects, with Analyst Ivor Jones of Numis Securities telling GamingIntelligence.com that this presented the company with “another way to benefit from the growth of online gambling in the US where it is already a payment processor to several key operators..It is also another example of management delivering on its stated strategy.”

Neteller a life-line to US online gambling

In spite of the UIGEA reinterpretation, many big banks have continued to decline online gambling credit and debit card transactions, including J.P. Morgan Chase, American Express, and Wells Fargo. As Wells Fargo executive, Nathalie Brown, explained recently:

“In compliance with regulation GG (Unlawful Internet Gambling Enforcement Act of 2006), we prohibit the use of consumer credit cards for Internet gambling. The networks (Visa, MasterCard and American Express) monitor the merchant category codes and block charges that don’t comply with federal regulations.”

As well as a murky interpretations of the UIGEA, financial institutions have also expressed their reservations when dealing with gambling transactions, which have traditionally saddled them with a disproportionately higher number of credit card losses and consumer disagreements. Naturally, their cautious approach has caused a great deal of frustration for online gamblers, and the nascent industry as a whole, as players struggle to get their funds off and on the various sites.

A resurgent Neteller, however, will now provide the industry with an ideal means for processing online funds as, unlike credit card payments, its transactions are instant and are much less likely to be declined. Commenting on the prospects of the service going forward, Executive vice president of business development for Optimal Neil Erlick, stated:

“We are providing updated features, capabilities and security as well as quick access to funds through our Net+ Card. Together with our U.S. financial institution sponsor, Optimal Payments will continue to be a leading provider of integrated payments solutions.”

After the deal was announced yesterday, shares in Optimal Payments plc rose by almost 3% to 480.50p, and today have since reached 500.5p, far above its 52 week low of 127p.