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The Pay-Per-Head World of Payments (The Before)
Before gambling was legalized, anyone who had a tangential interest in gambling used pay per head books. These were run by a friend’s buddy or something similar who pays a few bucks a month for software that allows the book to run. The player got to simply log on and place bets using a decent interface. Of course, this isn’t legal but it’s not the type of thing that gets much attention from authorities because it’s usually done on a small scale between two consenting adults (or teenagers). Payments took place in a variety of ways depending on the relationship between the player and the agent. On small scales, payment apps like Venmo and Cashapp are used to complete payment. For others, it may be crypto or cash, but usually payments were done on an informal basis. Of course, this system relies on the integrity of both parties to make payments as any credit based system does. It only functions to the extent that trust exists. It’s the one part of the PPH world that the regulated operators blow out of the water
The Modern (Legal World)
Payments for gambling used to be a bit of a taboo for banks. Whenever a new edgy industry is slowly welcomed into the mainstream, the financial system likes to be a bit prickly. Previously, I worked at a marjiuana data company and experienced the headaches that can come from this. This is indeed borne out by the early years in New Jersey, where payment approval rates for deposits were far lower than they are today, with industry insiders telling us that at one time the acceptance rate in New Jersey was hovering around 50%. It’s currently north of 90%. Consumers, at least the ones we’ve talked to, don’t even think much about the payments infrastructure because it’s become so seamless. It’s an easy part of the gambling experience for anyone involved in the space.
Now let’s look at the options that consumers have when it comes to depositing money at their favorite operator.
The easiest option for most people is the online banking service provided by Trustly. Basically all major American banks are supported, almost all books support Trustly, and anyone under the age of 30 strongly prefers online banking. The deposit transfer is instant and seamless, giving people money to bet with. The process feels as safe and reliable as it possibly could. The deposit transfer is free, as is the withdrawal. There is relatively limited friction on the part of the consumer. On the other hand, the withdrawal process isn’t instant. It often takes a few days for consumers to actually see the money pop up in their bank account due to various behind the scenes technology frictions. For most casual gamblers, this isn’t a big deal. The difference between getting a withdrawal on Monday or Tuesday isn’t something we have found is something Gen-Z gamblers are too concerned about. Let’s try to think about why. For the most part, responsible gamblers won’t have life changing sums of money in their accounts. That means that they aren’t using money that’s tied up on bets to pay bills, so the need for the money to appear the next day is low. Second, Venmo is the most common payment app among young people. Go out to dinner with friends? Venmo each other to even it out rather than make the restaurant split the bill. Unfortunately, Venmo now takes 1-3 business for money to return in a bank account after being withdrawn from it. We posit that this experience, as Venmo is the most common payment app for Gen-Z, makes the delay in the online banking method of withdrawal much more palatable to young people than those who are not accustomed to Venmo’s few days wait. It’s become a norm in Gen-Z payments to wait a few days to see the money hit the bank account because of Venmo.
Other options include cash deposits at select retailers. No one I know uses this for the simple reason that no one ever carries cash around and online banking is easier. I’m glad this option exists, it’s just not going to be a popular one for people who barely carry cash in the first place (as Gen-Z never does).
Next, there’s the option for a direct ACH deposit from a bank account. Often, this requires a large transaction higher than what is typical for the Gen-Z player who may or may not be in college and likes to gamble $25 bucks a game. Of course, technically this will be solid but the high dollar value required for the transaction makes it less tenable.
We’re moving towards being able to deposit with a debit and or credit card in some jurisdictions, which will of course relieve frictions. Credit cards can be a bit tenuous for a number of reasons morally, but that’s discussion for another time. Debit card deposits can be more or less seamless than online banking integrations depending on if the user has their card number memorized. We think this is a wash more or less, a useful feature but not one worth spending lobbying dollars on implementing, at least for Gen-Z consumers.
Lastly, we’ll discuss the Play+ option, which is simple in that it allows consumers to almost get a gambling esque debit card. The payouts are quick, but do require an ATM fee for initial deposit, making this option not free for the consumer as many others are. This may be a better option for those who are spending lots of time in and around casinos, or need near instantaneous withdrawals from a spending perspective. The Play+ option allows consumers to spend the money without having the existing delay.
Honestly, we’ll say that there is sure to be innovation in this space moving forward, but we’ve by and large had fantastic experiences when it comes to payments in the regulated space. It’s incredible that we were able to write about so many various options in a space where five years ago it was a waste land. We look forward to seeing whatever future types of innovation manifest themselves in the payment space.
