Payment modifications for the smartphone revolution

What is required to link US gaming payments with the ecommerce sector as a whole?

On 9 January 2007, Steve Jobs stepped onto the MacWorld Expo stage carrying a small black glass and metal object.

“We’re gonna make some history together today,” he said, holding up the new gadget.

In the 15 years after the iPhone's introduction, the smartphone has revolutionised the way we live by decreasing the world and bringing us all closer together. We spend half of our days staring at its screen, so when it is lost or shattered, it is not uncommon to feel as if a limb is missing.

In some ways, the impact of the smartphone on the commercial realm, particularly payments, has been even more profound. Consumers expect to be able to pay at the click of a button and have the product delivered to their doorstep without any friction or hassle. They will not tolerate payment delays, analogue systems, or being led down the garden path.

This has long been an issue in the gambling industry, where, in the majority of jurisdictions, anti-money laundering, know your customer, and social responsibility regulations complicate the payment process and make this degree of convenience unattainable.

Clicks kill

“When you get into the gaming space in the US the payments rules and regulations and the gaming rules and regulations really don’t operate in the same way,” says Global Payments president and member of American Gaming Association (AGA) board of directors Christopher Justice.

Justice presents a picture of an industry afflicted with obsolete technology that is losing touch with how people are spending money elsewhere.

“Part of it is how they’ve all come together coupled with technology that was built so many years ago that’s not really adapted to the fact that the majority of Americans have a smartphone in their pocket,” he said. “Three quarters of all retail transactions are done in self-service. Half of all holiday purchases last year were done on a mobile phone.

“All of these various stats pointing to where we’re moving as a society are dramatically different than what’s actually happening in the casino market primarily because it’s just built on models of yesterday.

“Part of the challenge then is consumers don’t understand why I can go onto Amazon.com, push a button, order dog food and the Uber driver is going to deliver it to my door before noon – all the while I go to the casino and I’ve got these hoops to jump through,” says Justice. “At the end of the day, we look at the gaming market very similarly to e-commerce, where clicks kill.”

Rectifying the circle

According to the Department of Justice, mobile, which functions in a more constrained environment than desktop, exacerbates the need for more efficient payment options.

“Unlike a computer with a keyboard and a much bigger landscape in which to operate, mobile is far more like electronic buying. So we are minimising those keystrokes, making the process easy whereby a guest can go from jurisdiction to jurisdiction, property to property, and still have access to the money they need in order to fund their gaming entertainment.”

The solution, according to the Department of Justice, is to build a linked environment that does not discriminate between online and offline offerings. As an illustration of this, he takes Global Payments' omnichannel solution as an example.

“So how we are really trying to address these things is the fact that we are creating an interconnected ecosystem. Our VIP Preferred programme, which has more than three million consumers, grows by about 35,000 to 40,000 members every month, which are consumers that are enrolling or getting their KYC done at either brick-and-mortar casinos or one of our online locations.”

The VIP Preferred option mentioned by Justice is a B2C e-check mechanism. The mechanism enables users to electronically send monies to iLottery or casinos in situations where other payment methods may not function.

Global Payments' TITO payment system has also achieved success by leveraging existing casino infrastructure.

Since the 1990s, the majority of slots in the United States have utilised a ticket-in, ticket-out (TITO) system. Instead of emptying of tangible coins, a slot prints a piece of paper with a barcode that may be redeemed at the cage, contrary to popular belief.

The company's VIP mobility product improves and expands upon this technology, allowing it to work within a casino's existing compliance framework rather than developing one from scratch.

The device enables customers to generate digital tickets that are QR code-linked to a slot machine or table game. Funds can be swiftly transferred in or out of the casino, or used for non-gaming activities.

“Our approach is very different because we’re the only system that leverages the TITO infrastructure, which has been in place for 20 years,” said Justice. “The reason we do that is because everything is tracked and auditable. Since we’re warranting the funds moving in and out, we’ll balance every day to the penny across the entirety of the resort.

“Leveraging that infrastructure allows that to be done, so we’re not creating new processes and opening the door to new compliance avenues like you would if you were using a wagering account-based system.

“The result of all of that is the way our system is built helps to facilitate and maintain the existing compliance a casino has already. There’s no AML footprint because it’s all electronic sources of funds that are already known.

Critical mass

Justice believes that the dynamics that have led to the current state of omni-channel payments will reach critical mass in 2023.

“If you look at a typical bell-shaped curve of a product introduction, we are really at the end of that early adopter phase moving into the fast follower stage,” says Justice. “2023 is going to be a remarkable year, in which more and more people will be investing in cashless solutions. It’s a natural evolution because as I mentioned earlier, three quarters of all transactions in the US and retailers are self-service today.”

“People don’t want to stand in line, they don’t want face to face conversations, they don’t want any of that stuff. As we move into cashless, it is hand in glove with where we are going as a society. Then when you look at the mobile purchases that were made last holiday season, everybody’s on their mobile phone.”

Justice also rejects characterizations of internet consumers as a mass of twentysomething trendy digital natives that interact with technology differently from the average American consumer.

“It used to be, I would have people tell me that my customers are too old: they’re not tech savvy enough to do this,” says Justice.

“Well, the fact of the matter is when we look at the typical demographic of our database, it’s a 55-year-old plus female. They’re on their Android, they’re on their iPhone, they’re using this technology.

“Were really finding this to be a tremendous convergence that’s driving forward. I think 2023 will be the year that we start to see mass adoption.”

By fLEXI tEAM