Online Gambling Merchant Account & Payment Processing — Everything You Need to Know

Online Gambling Merchant Account & Payment Processing — Everything You Need to Know

online gambling merchant account

In this guide, you’ll learn everything you need to know before setting up your online casino merchant account and how to choose the best gambling credit card processing option for your business.

The online gambling industry has to continuously keep up with changing market trends, which is why being able to rapidly innovate should be a key objective for online gambling merchants.

Gambling has always been a profitable business but, now, with these activities dominating the digital world and being made available online and on mobile, the profits are skyrocketing.

It is estimated that the global online gambling industry will be worth an impressive $1 trillion by 2021. The most significant growth can be seen in mobile gambling services, which are expected to further expand at a compound annual growth rate (CAGR) of 18.8% between 2017-2021.

So, the industry is not only growing but also becoming more and more innovative. Merchants can now take advantage of more advanced gambling credit card processing features such as faster deposits and withdrawals, 1-click payments, etc.

High Risk Merchant Account Comparison Checklist

Finding the perfect payment processor is no easy feat — download our PDF comparison checklist to see who on your shortlist will come out on top.

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The Challenges Facing Online Gambling

The gambling industry faces its own unique set of challenges. Hence, it’s important to learn as much about them as possible to be able to apply the most effective solutions.

Gambling Demographics

Well, one thing’s for sure — gambling has changed in recent years.

But, what’s changed exactly? Most notably, the manner in which people gamble and who the gamblers are.

By 2020, younger millennials and some Gen Z representatives are expected to make up nearly half (40%) of gambling consumers.

Perhaps unsurprisingly, these young gamblers (aged 18-21) prefer to place their bets digitally; in large part on their mobile phones. 

But, that’s not to say that the older generation has entirely given up their gambling habit. In fact, gamblers over 60 years old are currently spending more than double the amount they did just a decade ago.

User Experience vs. Security

Research shows that over a quarter of online gamblers has given up on opening an account with an online gambling website because of its complicated registration process.

Young, tech-savvy consumers want fast, easy, and seamless gambling experiences — which is why it’s crucial to give them the best technology has to offer in terms of placing wagers, depositing funds, or withdrawing winnings.

Look for a payment processor who can help you streamline your UX and UI while maintaining security and minimizing fraud risk.

Speed is what it’s all about in online gambling —  which is we’d recommend implementing 1-click payments, or other checkout optimization features, to ensure users can quickly (and successfully) get through the entire checkout process.

Just remember that user convenience shouldn’t come at the price of security. Luckily, certain payment processors are able to offer non-invasive versions of 3-D Secure which won’t negatively impact your conversion rate — talk to your provider to find out whether they can help you in this regard.

Fraud Prevention

Unfortunately, with increased interest in online gambling comes an increase in cybercrime. As such, online gambling consumers are risking their sensitive personal information being stolen when they sign up for an account.

This problem is so prevalent that, according to the ThreatMetrix Gaming and Gambling Cybercrime Report, 1 out of 20 new online gambling accounts is a fraudulent one. Whereas, bot attacks are responsible for nearly half of daily gambling traffic during peak periods.

Perhaps somewhat surprisingly, the riskiest element of online gambling actually takes place at the very beginning of a consumer’s journey, as it concerns the registration and account creation process.

This is why it’s incredibly important to talk to your payment processor and ask what kinds of features they’re able to offer which will aim to protect your business and your customers’ sensitive data from fraud — from day one.

Dealing with fraud once it happens is not as effective as preventing it from occurring in the first place — which is why it’s so important to find a payment provider who knows your industry’s specific needs, and who’ll implement smart anti-fraud filters that will be able to accurately distinguish your legitimate customers from fraudsters.

On the other side of the fraud prevention coin, however, anti-fraud filters can grow to become overly sensitive, leading to a decreased payments’ acceptance rate, lower conversion rate, and frustrated customers.

This is also something to keep in mind, especially since having an online gambling merchant account, you likely see significant spikes in payments volume in short bouts of time — which puts your merchant account at risk of being inaccurately flagged for fraudulent activity.

If this happens, your merchant account can be temporarily frozen, meaning that your customers won’t be able to successfully conduct transactions and you’ll be prevented from running your business operations. 

To get ahead of this problem, make sure your payment processor will be able to implement smart, automated anti-fraud filters which will be accurate enough to only flag 100% fraudulent transactions. This will ensure that all of your legitimate customers can seamlessly get through the checkout process, thereby also helping to protect your revenue stream from losses.

Laws & Regulations

The European market is the most significant market for online gambling, with its revenue accounting for nearly half of the total revenue. 

However, the European Union, as an entity, does not have a singular unified policy which regulates online gambling and, as such, regulating these activities is the individual responsibility of every EU member state.

This means that online gambling merchants have to stay up-to-date with any developments within their geographical markets, in order to ensure that the regulations they follow won’t become outdated. For instance, British and French merchants operating their online gambling businesses in said regions need a domestic license to do.

However, there are some commonalities amongst EU member states when it comes to online gambling merchant account regulations. Most notably, this regional market’s strictest regulations concern the Know Your Customer (KYC) and Anti-Money Laundering regulations.

As such, every online gambling consumer must be properly identified in order for merchants and acquirers to be able to assess money laundering and other crime risks associated with their online account.

And despite the United States being a sovereign country, online gambling regulations differ between the various states as well. For example, as of 1992, it became illegal to place bets on sports in most locations across America.

But most doesn’t mean all, and sports betting is still legal in certain states — namely, New Jersey, Nevada, and Delaware. Nevertheless, it’s the online gambling merchant’s responsibility to keep themselves properly informed about changes to laws, which concern their industry.


With high stakes, comes a high potential for chargebacks resulting from friendly fraud. Irresponsible gamblers can become frustrated due to suffering losses. And when this happens, they can even go as far as calling their credit card issuer and denying that it was them who made the charge.

In such a case, the online gambling merchant can almost surely count on being in the losing position, as the law is decidedly on the consumer’s side in such instances. And, once the online gambler realizes that they got away with friendly fraud the first time around, they are twice as likely to file for a chargeback again.

The consumer’s guilt concerning gambling losses combined with how easy it is for them to amend their mistake afterwards both significantly contribute to the online gambling industry’s high chargeback risk.

As Merchant Scout reports, one online survey found that the two biggest issues companies face when dealing with chargebacks are i) disputing them (59%) and ii) being able to identify friendly fraud (58%).

Luckily, certain providers out there have payment solutions whose services and features are specifically focused on boosting your chargeback dispute win rate and identifying friendly fraud.

As this requires advanced technological capabilities and a knowledge of your industry’s specific business model, make sure to vet your chosen payment processor to check how knowledgeable they are in your area of expertise, and whether or not their payment solution is innovative enough to offer these special chargeback-related services.

Online Gambling Merchant Account — MCC Codes & Regulations

What Is an MCC?

A Merchant Category Code (MCC) is a four-digit number that signifies a merchant’s line of business. MCCs were first instated by the IRS to help optimize 1099 reporting. Whereas, now, MCCs affect many other areas such as managing rewards programs and credit cards as well as disputing chargebacks.

How Are MCCs Assigned?

For over a decade now, major card schemes have been assigning MCCs to categorize companies by the market segment their business belongs to.

In short, the MCC is meant to denote the type of business that a given merchant is running. However, this can sometimes prove misleading, as businesses evolve and their operational realities change.

And since MCCs are assigned at the very beginning of a merchant’s business journey, they can easily turn out to be outdated down the line — especially since they’re not often reviewed or changed.

For instance, imagine that someone opens a flower shop but then ends up offering wedding planning services. This wouldn’t be a farfetched potential business model change, as these two services can be easily aligned — but the code for each of them sure is different. Going by Visa’s classification, wedding planning would be assigned an 7299 code, whereas, florist services would be listed under the 5992 code.

It’s important to note that the code categorization used by the IRS isn’t always the same as the one used by the card schemes — and card scheme classifications aren’t always consistent amongst themselves either. So, for example, a merchant will have a different code with Visa than they do with Mastercard, etc.

What’s the Verdict for Online Gambling Merchants?

It likely won’t surprise you to know that acquiring banks use MCCs to assess the potential risks associated with running merchant accounts — and your online gambling merchant account classifies as high risk.

So, what’s your MCC code?

Well, since the introduction of the three new gambling-related MCCs in 2015, which are meant to help distinguish licensed gambling institutions from unlicensed ones, you could be assigned any one of the following codes:


7800 Government-run online lotteries
7801 Regulated online casinos
7802 Regulated events for online horse and dog racing

Or, alternatively, if your online gambling merchant account doesn’t place in any of the abovementioned categories, it’s possible that you will be categorized under the 7995 code — which wouldn’t be ideal as banks tend to deny transactions with this code, without thoroughly assessing the risk.

In general, MCC codes are meant to protect processors and banks, as merchants with certain codes (i.e. high risk ones like the one assigned to you) are more likely to be a liability, because the services that constitute their core business are typically associated with a higher chargeback rate.

This is why it’s recommended that high risk merchants choose to work with high risk payment processors.

Just beware that many high risk providers will want to overcharge you for their processing services. Luckily, however, there are still some providers out there who are willing to offer fair gambling credit card processing rates.

Do some research and compare the providers on your shortlist to find out which of them is able to offer you the most competitive rates and fees.

High Risk Merchant Account Comparison Checklist

Finding the perfect payment processor is no easy feat — download our PDF comparison checklist to see who on your shortlist will come out on top.

Download FREE Checklist

Withdrawals — The Online Casino’s Most Important Feature

Quick and seamless withdrawals are amongst the most important features that an online gambling merchant account should offer to its customers.

This is because before a consumer decides on their preferred form of online payments, they first assess transaction times. And, of course, they’re looking for the quickest payment options available so they won’t be left without funds when they want to play.

For example, a technologically advanced online gambling merchant account will have the Original Credit Transaction (OCT) feature, which enables merchants to send funds directly to their customers’ debit and credit cards (depending on the chosen payment method).

On top of ensuring that your customers benefit from a superior user experience, having OCT will enable you to make payouts to them in seconds without having to deal with their sensitive data, (which is always preferred as far as security goes). 

On the other hand, if your online gambling merchant account only enables customers to add funds to their accounts via bank transfers, you’re not providing them with the most user-friendly option.

Being able to transfer funds solely with the use of bank transfers would be highly inconvenient, as these could take up to 5 working days to go through.

Whereas, with OCT, your online gambling merchant account is bound to see a range of business and operational benefits:

  • Security & ease of use

OCT offers PCI compliant money transfers which can be made directly by acquiring banks to customers’ credit or debit cards — no IBAN or BIC numbers required.

  • Global coverage

With OCT you’ll be able to send money directly to beneficiaries’ cards, across multiple countries and in various currencies.

  • Improved customer experience

These types of transactions are a very convenient and quick way of sending money directly to your customers’ cards.

So, if you’re not taking advantage of OCT payouts, talk to your current payment processor to see whether they’re able to equip your online gambling merchant account with this feature.

Being able to offer OCT payouts to your customers really does make a world of a difference, so if your current set-up can’t incorporate this functionality, consider switching providers.

Online Gambling Welcome Bonuses — Why They’re Worth Offering

When trying to attract online gambling customers, note that many of them consider it a big deal to receive a welcome bonus once they sign up for an account with your service.

This is such a deciding factor for consumers that not offering this perk could sometimes mean not getting that particular customer.

So, it’s important to note that if your online gambling merchant account doesn’t incorporate card transactions, you’ll be putting yourself at risk, as customers will opt to use e-wallets such as Skrill or Neteller.

Why is this risky? Well, because e-wallets essentially create a certain divide between the consumer, their funds, and your online casino, it becomes rather easy for them to be up to not good and not get caught.

This is because e-wallet deposits are confidential, making it nearly impossible for you to accurately assess risks and verify a player’s identity — and excessively easy for consumers to commit fraud and abuse the bonus system.

So, although providing your customers with the e-wallet functionality will work when they want to make online casino deposits, it’s not the best option if you’d like to offer them the welcome bonus they’re after — and expect — when they sign up.

Hence, when choosing a payment processor for your online gambling merchant account, talk to them about OCT payouts, or other withdrawal options that’ll protect you from fraud, while giving your customers the freedom of choice they’re after.

Online Gambling Merchant Accounts — Key Payment Security Features

Segregated Accounts

Having an online gambling merchant account and running an online casino means that you’ll have to consider how to make your customers feel at ease when it comes to depositing funds.

One way to ensure this is to make use of segregated accounts.

Let’s take a closer look at the three typical licence levels — basic, medium, high — and what they entail.

Online gambling sites and casinos need to have certain necessary licences to be able to accept players, but many merchants only choose to meet the basic level requirements — which don’t offer players much protection.

However, offering your customers segregated accounts might not put them completely at ease, as this alone doesn’t guarantee that their funds will be returned to them in case you enter insolvency.

This security measure helps assure your customers that their funds won’t be used to run your business and that they’re at least somewhat protected in case your online casino suddenly shuts down.

Under this approach, players’ funds are segregated, meaning that they’re kept in a completely separate bank account to the one that you use to run your operations.

  • Basic

Customers’ funds must be held in a separate bank account other than your own. However, in case your online gambling service had to shut down, the money in your customers’ accounts would still be considered a part of your business.

In such a case, the entity responsible for shutting down your operations, wouldn’t give your customers’ deposited funds back to them.

  • Medium

This licence level signalizes to your customers that you went a step further in terms of protecting them from potential losses. It means that you made additional security arrangements, such as taking out insurance, which aims to safeguard your customers’ money on their behalf in case you ever have to file for bankruptcy.

However, this licence level still doesn’t guarantee that their funds will be returned to them.

  • High

If you opt to attain the high level licence, your customers’ money will be held in a separate account, which will be legally separate from your company’s accounts — meaning that your customers’ accounts will be controlled by an independent entity or an external auditor.

In this case, if you have to shut down your operations, your customers will get their money back.

Why is this relevant to you?

Well, most notably because customers do their research before choosing where to sign up for an online gambling account.

And, if your gambling site or online casino only offers basic level security in light of potential issues on your end, customers might think more than twice before registering with your service.

This is why, when choosing a payment processor and online gambling merchant account, make sure to ask your provider whether they offer segregated accounts.

What Do Players Really Look for in an Account?

First of all, they’re not looking for a basic licence level account.

They expect you to have, at least, the medium-level licence. This makes your customers feel as though you have undertaken additional steps to protect their funds from potential losses, in case something goes wrong with your business.

Another deciding factor relates to how reputable your service seems. Customers will look at how long your online gambling site or casino has been in business and at how honest and transparent you are about your operations.

Consumers feel most confident about signing up to your service if you’re listed on the stock exchange.

However, players are willing to register with new online gambling sites and casinos if they offer the highest levels of fund protection and personal information security.

So, if you’re just starting out with your online gambling merchant account and service, make sure to put due care and consideration into making your customers feel good about registering their account with you.

To ensure this, look for a payment processor who is able to offer the segregated accounts feature, which will serve as an additional security measure, by helping guarantee that your customers’ funds will never be misappropriated or interfered with.

How To Protect Your Online Gambling Merchant Account From Fraud

Demystifying Fraudster Behaviors

Within the online gambling industry, fraud is a serious concern. In fact, as mentioned earlier, 1 in every 20 new gaming accounts is a fraudulent one.

Looking to get rich quick, fraudsters employ so-called synthetic identity fraud — meaning that they create many fake user accounts to run their illegal fraud schemes.

For instance, such individuals will register with various gambling sites to receive their welcome bonuses, which they then immediately cash in. Or, they create gambling scenarios where a few of their fraudulent accounts join a single game and they all lose to one account, (which, of course, also belongs to the fraudster).

And, unfortunately, it’s not easy to distinguish actual customers from fraudsters, as the latter employ a variety of identity-protecting tactics such as IP spoofing, VPNs, etc.

However, keep in mind that legitimate players could also be using VPNs or employing IP spoofing for reasons other than fraud. Many of these individuals simply value their privacy.

In order to avoid turning away non-harmful consumers, look for a payment processor who’ll be able to implement smart anti-fraud filters which can automatically distinguish fraudulent transactions from legitimate ones.

Betting Fraud — The Best Prevention Strategies

So, as you can see, protecting your online gambling business by authenticating users while simultaneously providing them with a quality customer experience is essential in order to prevent fraud, limit chargeback disputes, and avoid involuntary churn

However, creating that delicate balance between the inconvenience of additional authentication measures and the sought-after convenience of a seamless user experience isn’t always so easy.

That’s because, although consumers expect some degree of inconvenience in return for authorization security, which aims to put them at ease, too much user flow friction could cause them to turn away from your service.

In fact, a certain Jumio report found that more than a quarter of potential gambling customers abandoned the account registration process because it was taking too long and/or it was too complicated.

Hence, when running an online gambling merchant account, it’s important to pay close attention to security and authentication in order to protect your business from fraud.

However, 3-step authorization mechanisms can be a real conversion-killer. So, when looking for the right payment processor for your online gambling or online casino service, see if you could find one who offers a more conversion-friendly version of 3-D Secure.

For instance, some providers offer more subtle, non-invasive versions of this feature, thanks to which the customer doesn’t have to deal with redirections or annoying pop-ups, (as the authentication is displayed as an overlay). This kind of authentication system will help you maintain a low chargeback rate, while helping to boost your conversion.

Friendly Fraud — The Best Prevention Strategies

When it comes to friendly fraud in the gambling industry, it can take place for a variety of reasons, such as:

  • Regret due to losing a large bet
  • Remorse over being in debt
  • Not being able to recognize the name on a credit card statement
  • An intentional purchase made by a legitimate customer (i.e. a spouse) that the primary cardholder isn’t aware of and mistakes for fraud

Nevertheless, the most significant reason why friendly fraud remains a prevalent problem in the gambling industry is because merchants aren’t able to accurately identify it.

Once you discover which of your customers’ transactions are fraudulent, you should take the necessary steps to dispute them.

Even though the chargeback fee itself is non-refundable, you can still dispute fraud-based chargebacks to win back the refund amount for which the chargeback was filed.

And although, unfortunately, it’s not possible to eliminate the occurrence of chargebacks entirely, they are still worth fighting against.

That’s why, it’s best to look for a payment processor who understands your industry’s needs and will offer to not only help you reduce your chargeback rate, but who will also be able to provide the right tools, advice, and comprehensive support to help you successfully win more chargeback disputes.

These kinds of tools could include such things as an automated dashboard representing process, special forms, or smart transaction monitoring.

Other than equipping your online gambling merchant account with chargeback dispute fighting tools, you could also make use of chargeback monitoring and alerts, which can help you better identify chargebacks resulting from friendly fraud.

Round the clock chargeback monitoring can also improve your MID health, help you avoid chargeback fees, provide temporary relief from disputes, and lessen the impact that criminal fraud can have on your business.

Since many processors don’t have this feature as a part of their service bundle, ask your chosen provider if they’re able to offer this.

High Risk Merchant Account Comparison Checklist

Finding the perfect payment processor is no easy feat — download our PDF comparison checklist to see who on your shortlist will come out on top.

Download FREE Checklist

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Original Credit Transaction — What Is OCT and How It Works