Disbursements

Deep Dive: How The COVID-19 Virus Is Impacting The Online Gambling Industry

Financial uncertainties following layoffs and furloughs have made many U.S. consumers more frugal, but other individuals are still turning to retail therapy to cope with stresses. Shopping on mobile devices has increased 7.7 percent in March, even as shopping in stores is down, according to recent PYMNTS research. Purchasing cannot occupy consumers for long, however, and they are searching for other ways to stay entertained.

Online gambling or gaming is one possible outlet, and the sector may even make it through the pandemic with less financial damage than other industries. Such sites are expecting major growth in the U.S., reaching a value of $102.9 billion by 2025, according to one study. Online gambling companies appear to be weathering the pandemic better than their brick-and-mortar cousins, but an environment in which gambling occurs online requires payments to shift as well. Consumers sitting down to bet through their computers or phones likely do not want to receive winnings via checks and expect effortless digital payments — even with online gambling platforms’ security measures ensuring winners are properly verified.

Most digital-only gambling companies are cognizant of customer expectations, and online casinos typically offer a range of digital disbursement options so players can select the option that best meets their specific needs. The importance of fast, secure disbursements might hold a different weight now that players are betting online more often and more readily looking for the speeds they experience with typical retail transactions.

The following Deep Dive will examine the changes occurring in online betting, analyze how the COVID-19 virus has affected the industry and explore what winners expect out of disbursements going forward.

Online Gambling Changes 

The pandemic is sweeping through an already critical year for online betting. A U.S. Supreme Court decision allowed sports betting in 2018 and inspired 2019 laws that govern the fledging industry in 10 states and set guidelines such as how online casinos can operate and how sports betting would be taxed. This year was expected to be lucrative for online sports betting as it is the first since those regulations were created.

The COVID-19 pandemic is testing that prediction, but short-term sporting event cancellations — and reduced betting opportunities — have not yet indicated longer-term problems for the industry. This is especially notable as efforts to minimize the virus’s spread keep brick-and-mortar casinos closed. States have experienced decreases in revenue and minor dips in sports betting, but an overall jump in earnings from other online gambling sites. New Jersey issued closing orders for its brick-and-mortar casinos on March 16, for example, and while revenues for its casinos fell 61.7 percent that month compared to March 2019, its online gaming revenues over the same period increased 65.7 percent. Pennsylvania reported similar figures, with tax revenues from brick-and-mortar gambling declining to $50.5 million in March 2020 from $67.5 million in March 2019. The state has earned $24.3 million from online gaming since the summer of 2019.

New Jersey and Pennsylvania have become two of the most important markets for U.S. online betting, and their revenue jumps bode well for the industry’s ability to outlast the pandemic. Players who become accustomed to betting online over several months may not feel as inclined to visit brick-and-mortar casinos once they reopen — unless they grow dissatisfied with online providers’ services. Digital services must enable seamless payments to keep up this positive momentum and simulate the excitement of casinos paying winners in the moment with cash stacks or checks. Sending funds through the mail for online customers is not as rewarding, meaning sites must create their own instant
experiences.

Disbursement Barriers And Goals

Online casinos worldwide already make digital disbursements by relying on third parties that have been processing payments for decades. Credit and debit transfers have been especially popular in Europe for sending funds to winners, for example. Online betting services in the region are now even exploring depositing such sums directly into digital wallet applications on users’ mobile devices.

Casinos in the U.S. have been struggling to replicate that instant access and consumer satisfaction. Customers who immediately receive their funds are more likely to keep betting, but relying on ACH, credit or debit disbursements means these individuals will need to wait between three to five days before receiving their winnings. Winners betting in their homes during the COVID-19 pandemic — unable to do so in the middle of crowded casinos — may be more frustrated when their money does not come through right away because they do not want slow payments to interrupt their normal gambling flows. Gambling sites should therefore focus on how they disburse funds to customers as users will likely flock to those that can enable the quickest experiences.

Platforms that do not offer instant disbursement options could be losing out to those that do, encouraging implementation in the industry. Betting service 888.com invested in automated payment solutions in 2019 and has taken additional steps like adding ACH bank transfers to make both deposits and disbursements move quickly on its site. Other factors — such as the cost to process checks, lack of security with cash and intensifying competition — are also encouraging online entities to shift operations and support faster disbursement methods.

Online sites licensed to operate in certain states may be finding it more difficult to make these upgrades than others as they must consider how they can add new payment methods that are compliant with regulations. The COVID-19 pandemic may have led more U.S. customers to the expanding online betting market, but it has not changed the country’s more nascent legal ecosystem compared to markets like Europe. EU member countries can have their own rules on gambling, similar to the ways that U.S. states can have their own laws. Online gambling is much more established in the EU, however, and these countries have had time to settle in and work with any differences. Trade associations like the European Gaming and Betting Association (EGBA) have helped to set codes of conduct for companies to follow as the online betting market expands.

The U.S. gambling market is younger, meaning its approach to regulation is more fractured and integrating digital disbursement applications wholesale is more difficult. Its online gambling sites use online payments, but methods must be licensed on a state-by-state basis and transactions are subject to local laws. Using mobile wallets for disbursements means casinos must have approval from both state and federal regulators before they implement the software to support them, for example. States also have different tax rates on bets and payments, which can make calculations tricky for sites that want to operate nationwide.

Regulators and online casinos will need to pay serious attention to how consumers are betting and want payments to work as more gamblers go digital during stay-at-home directives. The industry is projected to be worth more than $81 billion by 2022, and players will continue to want faster, more direct access to their winnings. The pandemic has proven that gambling enthusiasts are willing to adapt and move their hobbies online, meaning providers must work to offer instant disbursements to those looking to toss their chips into the growing industry.

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NEW PYMNTS DATA: HOW WE SHOP – SEPTEMBER 2020 

The How We Shop Report, a PYMNTS collaboration with PayPal, aims to understand how consumers of all ages and incomes are shifting to shopping and paying online in the midst of the COVID-19 pandemic. Our research builds on a series of studies conducted since March, surveying more than 16,000 consumers on how their shopping habits and payments preferences are changing as the crisis continues. This report focuses on our latest survey of 2,163 respondents and examines how their increased appetite for online commerce and digital touchless methods, such as QR codes, contactless cards and digital wallets, is poised to shape the post-pandemic economy.

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