Payment stability is a critical issue for the gambling industry. Despite registering in tax havens like Curacao or Malta and generating substantial revenue, gambling operators don’t have it easy. 

It starts with securing credit card processing which is a daunting task, especially if you need to obtain a gambling merchant account. Most payment facilitators require a proven processing history with acceptable levels of refunds and chargebacks, as well as evidence that your business can scale despite the inherent challenges. Due to the varying legality of online gambling from state to state, these businesses and their associated payment processing accounts are often classified as ‘high brand risk,’ resulting in rather high transaction fees and stricter regulations.

Further, to attract and retain customers, gambling operators need to be able to process payments quickly and reliably. All the regulatory changes, compliance and financial instability makes it rather difficult for the gambling industry to maintain payment stability

The Struggle for Payment Stability in the Gambling Industry

One of the primary reasons for this instability is the higher likelihood of credit card transactions from the United States being flagged as fraudulent and declined by card companies. This unfortunate scenario can have a detrimental impact on gambling merchants, leading to an increase in their decline ratio. 

According to a study the average decline ratio for merchants in the adult industry is 10-15%, while for gambling businesses, it is as high as 30%. These high decline ratios can be a disaster for the business, as it not only affects their bottom line but also means higher processing fees from payment processors who view the business as high risk. 

Even though expansion of legal online gambling in new states has further fueled the need for an ample number of processors. The Covid-19 pandemic has also played a role in driving interest in online gambling, as many gamblers were confined to their homes for extended periods. However, despite the increased demand, many processors have shown a lack of interest in dealing with the complexities of federal and state laws and regulations governing sports betting.

Additionally, some processors may require substantial reserve amounts, further straining the merchant’s financial resources.

When high-risk merchants experience high decline rates, it can have several implications for their business and overall online presence. Here are some potential consequences, if decline rates are not kept under a tight rein:

  1. Loss of Revenue: High decline rates translate into a significant number of transactions being declined by payment processors or card issuers. This directly translates into lost revenue for the adult merchant. 
  2. Customer Dissatisfaction: Declined transactions can frustrate customers, leading to a negative user experience. This directly damages the reputation of the merchant website and discourages customers from returning or recommending the site to others. 
  3. Limited Payment Processing Options: Payment processors may be less willing to provide services to high-risk merchants with more-than-average decline rates. This restricts merchant’s ability to process customer payments and negatively impacts business growth.
  4. Compliance and Regulatory Issues: Gambling and other high risk merchant websites typically operate in a heavily regulated industry. High decline rates raise concerns about the legitimacy and compliance of the transactions being processed. This can attract scrutiny from regulatory bodies and payment networks, potentially resulting in additional audits, fines, or even the suspension of payment processing services.

A Possible Solution: Registering A Subsidiary

Fortunately, there is a solution that can significantly reduce the decline ratio and provide much-needed payment stability for gambling businesses: registering a subsidiary in the target country. While this approach may initially seem daunting, as it requires obtaining licenses from each state in the United States, the benefits outweigh the challenges.

By establishing a subsidiary in the target country, gambling merchants can enhance their credibility and gain the trust of card companies. With a local presence, transactions originating from the United States are less likely to be flagged as fraudulent. This leads to a substantial reduction in the decline ratio, providing much-needed stability in payment processing.

Moreover, registering a subsidiary brings financial advantages to gambling businesses. With the appropriate licenses from each US state, merchants can save significant amounts of money and enjoy lower processing rates. The cost savings can be allocated to other critical aspects of the business, such as marketing initiatives or enhancing the user experience. 

Registering a subsidiary in the target country offers a range of benefits beyond reducing the decline ratio and achieving payment stability. Some additional advantages include:

  1. Enhanced Regulatory Compliance: Registering a subsidiary demonstrates a commitment to operating within the legal framework of the target country. By adhering to these regulations, merchants can avoid legal complications and maintain a positive reputation.
  2. Access to Local Markets: Establishing a local presence through a subsidiary allows gambling businesses to tap into the specific market they are targeting. This provides opportunities for increased customer acquisition and growth. By understanding and catering to the preferences and needs of the local market, merchants can gain a competitive edge and expand their customer base.
  3. Improved Customer Trust and Confidence: Having a subsidiary in the target country creates a sense of trust and credibility among customers. They feel more confident engaging in transactions with a local entity, knowing that their payments are secure and their information is protected. 
  4. Streamlined Operations: Operating through a subsidiary enables gambling merchants to establish streamlined processes and localized support systems. They can tailor their operations to suit the specific requirements of the target market, ensuring efficient payment processing and customer service. 

Potential for Partnerships and Collaborations: Registering a subsidiary opens up opportunities for partnerships and collaborations with local businesses, including payment processors, financial institutions, and marketing agencies. These partnerships can provide valuable resources, expertise, and market insights that further support the growth and success of the gambling business.

TickleCharge: Your Partner in Achieving Payment Stability

By working with a payment partner that understands the intricacies of the gambling industry, merchants can save both time and money during the establishment of their payment channels. 

Here is where TickleCharge enters the picture. Having the knowledge and experience to navigate the complexities of high-risk gambling merchant accounts and providing tailored solutions that meet the specific requirements of gambling businesses. Experts in our team can handle the challenges associated with obtaining credit card processing and can guide gambling merchants through the process, ensuring compliance with regulations and minimizing business risks.

A payment partner that is well-versed in the gambling industry can help merchants increase their revenue once the payment channels are set up. They can offer solutions that are specifically designed to optimize payment processing for gambling transactions, resulting in smoother transactions, reduced decline rates, and improved conversion rates.

TickleCharge’s team of experts has extensive experience in assisting gambling businesses with subsidiary registration and licensing processes. We firmly believe that legal hurdles shouldn’t hold legit businesses back. That’s why we’ve partnered with top-tier industry lawyers who specialize in ‘high-risk’ industries. Their expertise ensures your business is legally protected and can operate with confidence.

Our experts can guide merchants through the complex landscape of obtaining licenses from each US state, ensuring compliance and minimizing bureaucratic hurdles. TickleCharge’s comprehensive payment infrastructure and advanced fraud prevention measures can minimize the risk of declined transactions and chargebacks, fostering a more secure and stable payment environment.

Want to hear more about this solution and how to apply it to your business?

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