Payment Processing Biggest Issue Holding Back NJ Igaming Industry

Home » Poker News » Payment Processing Biggest Issue Holding Back NJ Igaming Industry

Friday, May 2nd, 2014 | Written by Shane Larson

New Jersey launched its first regulated online gambling site in 2013 and in March 2014 the state’s six casinos holding internet licenses produced $11.9 million in revenues, up 15% over the $10.3 million generated in February. The results may be just one tenth of the projections made pre-regulation, but they do at least show the potential a well operated igaming industry could have for an individual state.

Nevertheless, New Jersey currently has a number of issues which if resolved have the potential to give a massive boost to it’s nascent online gambling industry, the most important one of which is the ability of players to actually get their money on the site in the first place. Casing point, according to data collected by Central Account Management System (CAMS) LLC only between 42% and 46% of all credit card transactions used to fund a New Jersey online gambling account are accepted.

Payment processing issues holding back industry

CAMS LLC handles online payments for New Jersey’s biggest online operator the Borgata Hotel Casino (Party Poker), as well as from the Trump Taj Mahal Casino (Ultimate Gaming) and Trump Plaza Hotel (Betfair), before routing them through to the financial institutions. However, as Matt Katz, CEO of CAMS LLC, explains having such a low credit card acceptance rate “is the single biggest thing” that’s holding back New Jersey’s igaming industry.

Despite the fact in 2011 the US Department of Justice stated that online gambling outside of sports betting was not in contravention of the UIGEA, many financial institutions still refuse to offer their payment processing services to online companies. As NJ Division of Gaming Enforcement Deputy Attorney General Mary Jo Flaherty then explains:

“New Jersey patrons continue to experience difficulties in use of their personal credit and debit card accounts in funding individual Internet gaming accounts.”

Low credit card acceptance rate

According to Flaherty, MasterCard has one of the NJ’s highest approval rates with 73% of attempted transactions being accepted, while for Visa that figure slips to just 44%. The situation then becomes even more restrictive with American Express and Discover failing to approve any charges, at all.

Commenting on his take on the situation, American Express spokesman William Tsang said: “American Express does not do business with high-risk industries and we prohibit the use of the card for any gambling services.”

Apparently, the company’s stance is based on the fact gambling services historically tend to account for a higher proportion of credit card losses and disputes amongst its card holders than other transactions.

Creates negative impression of industry

Unfortunately, having an online credit card deposit declined by VISA or MasterCard creates an extremely negative impression of New Jersey’s igaming industry as a whole, as those people used to receiving VIP rewards for paying by credit cards are no longer presented with that option. Further confusion could also be caused by potential customers assuming online gambling is still illegal in New Jersey and simply give up trying to play on NJ sites all together.

Highlighting the problem, Matt Pineault, a player from Bergen County, explains: “As a player, it is worrisome that people aren’t able to get money on the site. To have people who want to play and deposit not be able to is terrible. Depositors are the lifeblood of the poker site, and without them they obviously can’t survive.”

Millions of dollars lost each month

Other alternative online payment system, such as Neteller and Skrill, have been picking up the slack to help some gamblers get their money on the various sites. In addition, other gamblers have found Automated Clearing House (ACH) options to have a hight acceptance rate for transferring funds directly from their bank accounts onto the igaming websites. According to CAMS CEO Matt Katz, for instance, 60% of those people who suffered failed credit card transactions were subsequently able to deposit money online via an ACH transfer.

Nevertheless, credit cards still remain the most popular method of funding an online gambling account and with an average acceptance rate of just 44%, millions of dollars are being lost each month due to nothing more than technical problems. As one frustrated online gambler put it: “I abandoned trying to use credit cards from the get-go. Major banks in the beginning made it clear that they were not participating and it would be a hit and miss proposition.”