In July 2019, Macquarie, one of the five largest banks in Australia, implemented a block for all credit card transactions on gambling and lottery purchases.
It is part of a larger trend of payment processors making a stand against problem gambling, with many banks and credit card providers already offering optional restrictions within their software.
Australian Banking Association (ABA) recently called on shareholders to share opinions on the matter, potentially leading to further bans from its members. Their call for feedback sets the tone, stating – «Access to credit for gambling can create unique harm whereby large amounts of debt can be accumulated in a limited period.»
Events in Australia affected ongoing debates in the United Kingdom and New Zealand, with new regulations recently introduced by Gambling Commission and DIA, respectively.
Australia Situation: Credit card gambling purchase rejected
According to the Australian Institute of Family Studies, there are 6.8 million regular gamblers in Australia, which translates into 39% of the population. Some estimates count 80% of adults as engaging in irregular, casual gambling. In 2016-17 alone, Australians spent around USD 1,272 in a year, according to Gambling Statistics. Aussies also have the highest per capita annual gambling losses in the world – around USD 18.4 billion.
This culture is created by easy access to slot machines (pokies), betting, and lotteries. Access to credit by problem gamblers exacerbates the situation, as stated by Tim Costello, Alliance for Gambling Reform director: «Australian banks have been gouging millions from gamblers by treating credit card deposits as cash advances which carry high up-front fees and instant excessive interest charges running to nearly 20 percent. »
Macquarie now outright rejects all credit card payments related to gambling and betting. They also imposed a hard limit up to $AUD1000 on cash advances, in a move aimed to put less pressure on Aussies in the financial risk group.
The Challenges Facing the Online Gambling Industry
The online iGaming industry often faces regulations and changes in regions. In October 2019, PayPal restricted its users in Germany from linking accounts to online casinos. Except for Schleswig-Holstein state, where gambling is legal, users found themselves unable to make gambling transactions.
Like any emerging industry, iGaming doesn’t yet have a framework to lean on. Even the Social Casino term with wagering virtual currency means different things in most countries. While UK Gambling Commission says games of chance where «the prize is not money or money’s worth are not gambling under UK legislation, » some EU governments disagree and discuss regulating videogames and free-to-play mobile games under the «gambling» label.
So even free slot games and virtual poker in mainstream video games can be restricted as gambling in certain jurisdictions. For clear-cut online casinos with real money wagers, enforcing laws is still a challenge – companies are often registered offshore in states like Malta and Curacao. It leaves individual service providers such as Macquarie, PayPal, and others to implement solutions – controlling cash flow rather than regulating iGaming providers themselves.
Online casinos have only one way of responding to the situation – introducing more payment methods and adapting to the environment. Credit cards are often used to circumvent deposit fees imposed by payment processing systems and e-wallets, but with bans in Australia and other countries, they now rely on:
- Direct bank wires
- Processors are still willing to take them like Neteller, Skrill, AstroPay, PaySafe, etc.
- Cryptocurrencies (Bitcoin) and virtual payment options.
That is the time when the new category of slots arises on the market in Australia and other countries like Canada and South Africa. Online slots became trendy as customers appreciated no download and no registration feature. Also, online slots were created for PC and mobile that made them much more comfortable to access.
Leaders that qualified on land-based slots machines burst in the new category and received and wide recognition. For example, everyone can easily find now IGT free slots just for fun on igtslots.net online and do not worry about legal aspects. IGT, International Game Technology, a large US manufacturer and distributor of slot machines that was acquired by Gtech.
Since then, IGT has released a bunch of great free games like Wolf Run, Lobstermania, Elephant King, Siberian Storm, Double Diamond, Family Guy, Triple Diamond, Miss Red, 100 Ladies, and Wheel of Fortune.
Takeaways for the UK on credit card ban
The Gambling Commission has been debating a UK credit card ban since March 2018. It held a twelve-week Consultation in August 2019, resulting in proposed changes to License Conditions and Codes of Practice. Gambling Commission came to the following conclusion: «We are persuaded that there are risks of harm associated with using credit cards for online gambling and that we need to act to protect consumers. »
Expected to take effect as of April 2020, changes will either be outright banning or restricting the use of credit cards in all forms of remote gambling. Gambling Commission is discussing the following challenges:
- Ways to mitigate the inconvenience for non-problem gamblers
- Assess the technological and financial feasibility of this ban
- Improve transparency concerning gambling payments
- The necessity of further restrictions for non-remote betting
- Prevent e-wallet providers from using credit cards for gambling by proxy.
The Macquarie decision in Australia affected the Gambling Commission consultation and served as proof that such restrictions are technically possible. Sixty-six stakeholders weighed in on the debate – 25 licensed operators, 55 members of the public, 4 representatives of financial institutions, 2 members of trade associations, and 24 others, including charities, faith groups, and academics. According to the Summary of Responses to the Gambling Commission call for evidence, the reasoning is as follows:
- Using credit cards isn’t consistent with «bet what you can afford to lose» principle
- Applying to other forms of lending is less spontaneous and allows more time to think
- Debt exposure from credit cards can be much higher than different types of lending
- One interruption might be enough to prevent compulsive gambling impulses.
It’s important to note that the counter-arguments of operators as well:
- Providers don’t have the technical distinction of overdrafts, loans, or personal funds.
- Bans would make problem gambling less visible and more difficult to address.
- E-wallets provide an opportunity to circumvent bans.
Most members of the public and especially individuals affected by problem gambling are in favor of new restrictions, while operators express concern about their real-world feasibility.
Conclusion
The decision of Gambling Commission goes further than the Australian experience, potentially regulating all credit card providers in the United Kingdom. Exactly how these changes are going to look like will be clear in April 2020.
iGaming technology companies are already starting to adapt and propose solutions that would allow them to detect problem gambling early in the cycle. Additionally, the landscape is going to evolve with hopefully incorporating more «safe» payment options that don’t involve overdrafts and easy credit for individuals in need of help.
