Facing a number of challenges across all disciplines, do betting incumbents understand the operational opportunities that Fintech advancements will present to them, as this month’s PE Spotlight breaks down Fintech as a current and future asset
Fintech is a phenomenon that is changing how businesses operate around the world, leaving the gambling sector needing to evaluate how fintech has transformed betting, and how it will modify it in the future.
When trying their luck placing a bet, punters have the luxury of payment gateways such as Paypal, where bank details stay private and are never passed onto a third party.
Currently, the payments landscape continues to fragment, leaving consumers with choices of how they make their payments.
The advancement of this aspect of fintech and the gambling industry has resulted in players’ expectations increasing, and they anticipate a selection of ways to deposit and cash out from what operators have to offer, with these transactions to be processed immediately.
In a recent study conducted by Paysafe, nearly a quarter of respondents said that the number of available payment methods was a key issue when choosing between different sports betting operators.
Major new technologies that are influencing the gambling industry includes blockchain, which has the potential to improve transparency when placing a bet by a considerable margin, due to its decentralised ledger base.
Consumers would be able to add to their accounts without any identification processes due to the increased security of the blockchain.
Authentication requirements are fulfilled by private key cryptography, where possession of the private key is effectively ownership, and it also spares the need to share too much personal information that could be exposed by hackers.
The sophisticated algorithms that are used by gaming providers, such as those being offered by an online casino can be placed into blockchain, resulting in blockchain casinos, a transparent way to gamble with secure payouts, and with lower comparative operational costs.
Another significant development has been the 3DS 2.0, that was introduced by EMVco last year.
The project is a messaging protocol that promotes a smoother path for consumer authentication, allowing the consumer to validate themselves with their card issuer, this is while they are making non-card present e-commerce purchases.
This will help gambling companies to prevent fraud, as the additional security layer of this system will prevent unauthorised card, not present transactions, thus serving to alleviate one of the primary concerns for any player when they use a betting provider.
As a new standard for online card payment authentication, it will see more stringent requirements for strong customer authentication, and result in changes in the ways that consumers identify themselves.
The gambling sector will have to factor in that the advancement of fintech in the industry, has the capacity to disrupt financial processes and transactions, issues that it will have to face.
Daniel Kornitzer, the chief business development officer at Paysafe, the parent company of gambling payment providers Skrill and NETELLER., reflected: “In my mind, it’s all about turning the technology we develop and use to meet new industry guidelines into value for the end customer.”
“The aim is to balance security with convenience to make the customer experience seamless but at the same time leverage emerging technology such as machine learning, behavioural analysis and biometry for positive outcomes, such as to provide bulletproof security. If you can combine the two it’s the best of both worlds.”
Fintech has already been responsible for major shifts in consumer interaction within the betting industry, paying for a bet via a mobile phone is a typical manoeuvre, which you do not have to be technologically advanced to perform.
Also, strong customer authentication requirements incorporate the usage of smartphones, such as SMS verification codes, and can even stretch to using biometrics on a “who you are” principle.
Both of these methods fortify more traditional ways to confirm consumers’ identity correctly, such as passwords, which are still used and are acceptable to many players.
Although technologies such as biometry can remove the need for passwords, which would streamline the authentication system, as biometrics would cancel out the need to type out passwords on a sometimes awkward smartphone keyboards.
“Online gaming and sports betting are already trending towards being a mobile-first industry, but the enhanced consumer experience of depositing on mobile due to biometric verification due to new strong customer authentication regulation may actually assist this shift,” Kornitzer exclaimed.
“Even payments not using biometrics will need to be authenticated via SMS, so desktop deposits will almost certainly start to become a thing of the past.”
He added: “Gaming operators should embrace this move, a more convenient deposit and withdrawal process on mobile dovetails with operators’ other product developments, to accelerate the desired market share growth of mobile betting.”
Inevitably, new waves of fintech initiatives will bring with them hurdles to clear, such as varying regulations on a global scale, allied to the fact that the gaming industry is already heavily legislated for.
Yet fintech can be part of the solution in meeting the demands of regulation, and alongside security measures, providing know your customer features enhancing the consumer experience.
There is little doubt that gambling operators and fintech companies will have a lot to talk about in the future as progress continues.