Forecasting Alternative Payments in Online Gambling; Promising, But Uncertain

In brick and mortar casinos, entertainment, plush surroundings and food and beverage options are ployed to lure in would-be bettors. Online, glitzy webpage banners, targeted ads and video spots during sports programming are the chosen tactics.

Now consider the gambling industry. Complex doesn’t begin to cover it. There are innumerous challenges getting humans to ‘play’ with money including the massive potential for fraud, market monopoly from big companies, currency volatility and heavy political interest.

So how have alternative payment methods, defined as non-card payments and abbreviated to ‘APM’,  become a part of this industry, how widespread and effective are they currently and what’s the outlook for the future? 

Why the need for APMs?

As we move towards being a cashless and even cardless society, the popularity of APMs is only going to increase as they allow consumers to pay via smartphones. This is simply not possible with traditional payment methods. Casinos accepting Trustly as a payment method have become entrenched within the iGaming space, and that is something that is here to stay.

If depositing with PayPal, for example, you simply enter the amount you wish to deposit and then log-in to your PayPal wallet using your email address and password.  

The former can take minutes. The latter, seconds and that instant-gratification is what drives the popularity of APMs for gamblers looking to deposit, bet and withdraw quickly. 

Globally, there are more than 200 different types of APM and a 2019 report from payment system company, ACI Worldwide, estimated that they comprised over half of all global e-commerce payments.

Are they better than just using your card?

Almost universally, yes. E-wallets such as Skrill, WebMoney and, most famously, PayPal are very widely accepted among online and in-person casinos, require no transition of personal details for gambling use and can process withdrawals and deposits at speed. 

Digital wallets also typically save users money through these transactions by employing lower fees per transaction. Traditional banks typically charge fees for various transactions, such as wire transfers, ATM withdrawals, and foreign currency transactions. In contrast, digital wallets often offer free or low-cost transactions, especially for basic transactions like transferring money between wallets or making online purchases.

International money transfer rates on digital wallets are also typically much lower than traditional banks, which also typically have poor exchange rates.

There is also evidence to suggest that casinos offering digital wallet transfers enjoy higher repeated visit rates to their sites given the ease of deposit, pay and play.

Other providers such as Trustly, integrate directly with the user’s bank but maintain security around information sharing and are becoming popular in their own right.

The company even has its own gaming and gambling-specific technology, Pay N Play, which enables its client list of over 100 operators to offer instant deposit and withdrawals. 

What about crypto?

If you’re a cryptocurrency holder, that’s also a deposit option on many sites. Would-be gamblers don’t need to open a bank account to use crypto and it is usable instantly at any time as long as you have access to a cryptocurrency wallet. Some online casinos even offer bonuses for using cryptocurrency as a payment method. Indeed, with no centralisation or middleman, deposits and withdrawals at a crypto casino or betting site may be significantly cheaper. Transactions with crypto may still have costs attached to them, but could be substantially smaller than those associated with traditional payment systems.

But crypto is, for lack of a better word, bonkers. Even if you have acquired sufficient coinage through one of the currencies such as Ethereum, Bitcoin or XRP, using crypto wallets is a complicated process. Moreover, lose your password and it’s gone forever and to top it all off the market remains incredibly volatile.

Crypto may yet have its day in the sun for gamblers, however. An upcoming UK government whitepaper is, among many other things, exploring Blockchain as an official form of payment method that can be integrated across a significant number of online casino sites.

It’s…complicated

The complications for APMs aren’t necessarily due to their functionality, but more down to that of the gambling industry. 

Cryptocurrencies *would* be a very viable and secure option for many users if the barriers to entry and risk were not so high. For those reasons, other alternative payment methods like digital wallets or Trustly seem to be the preferred option currently. More broadly, the industry itself is a complex beast, though change is afoot.

The UK, online gambling’s largest and most mature global market, grossed $12.5bn in 2021 and is set to imminently see a white paper, a proposal for future laws, from its government in the coming weeks. 

Repeatedly postponed since 2020, the framework is expected to consist of tighter restrictions on winning amounts and bet frequency in an effort to curb the thorny and significant issue of addiction. This while the UK still sits as the most regulated gambling market in the world

The US, meanwhile, despite being synonymous with restrictive gambling outside of Las Vegas, is slowly relaxing its no tolerance policy across numerous states. In 2018, a Supreme Court ruling decriminalised online gambling at the federal level, paving the way for states to determine their own approaches and leaving a somewhat unclear state of play. It remains, as a whole, the second largest online gambling market, with an estimated gross total of $11bn in 2021. 

Today, a number of states have legalised it and welcome license applications, others have made sports betting legal while refusing to consider casinos and some more conservative states refuse to budge and intend to consider it illegal for the forseeable future.

A changing world

What is clear is that just as the variety of online games to be played and places to gamble grows rapidly. 

So too do the ways in which people opt to pay for their pleasure. The political landscapes of mature gambling markets will continue to dictate their respective successes and restrictions. 

There will be a significant impact on how punters view APMs as their chosen playing method should governments, for example, choose to back cryptocurrencies for added security and fraud prevention or limit fast pay and play models offered and championed by digital wallet providers.