As someone who’s spent years in the customer experience, fintech and gaming industries, I’ve seen my fair share of payment flow and method trends ebb and flow, writes Trustly‘s VP of Gaming John Parsons.
But there’s one strategy that’s been gaining traction lately, and frankly, it’s got me a bit worried. I’m talking about payment steering – the practice of directing different types of transactions to specific payment rails based on various factors.
Now, don’t get me wrong. I understand the appeal. Who doesn’t want to optimize costs and minimize risk? But as with many things in life, it’s not that simple. Let me break it down for you.
First off, let’s talk about consumer preferences. We’ve all got our favorite ways to pay, right? Maybe you’re all about that debit card life, or perhaps you’re an ACH aficionado. Whatever your preference, it matters. Studies show that payment method loyalty is a real thing. By making it harder for customers to use their preferred method, we risk pushing them right into the arms of our competitors.
Then there’s the issue of customer behavior. Picture this: a new player dips their toe in the water with a small bet. Great! But what happens when they come back ready to make a big splash? If we suddenly force them to switch payment methods, we’re introducing friction at a crucial moment. That’s a recipe for abandoned transactions.
Now, let’s look at the gaming industry. It’s a high-risk space, no doubt about it. That’s why open banking with ACH payments is such a crucial payment rail for the industry. It offers high limits and, thanks to open banking, gives us a peek into a customer’s financial history. This isn’t about being nosy – it’s about understanding the risk and making informed decisions.
But here’s the kicker: for ACH providers to do their job well, they need to see a lot of traffic. It’s how AI and machine learning algorithms learn and improve. By steering certain transactions away from ACH, that learning and improvement can’t happen.
Let’s not forget about guaranteed payment methods. The industry has relied on this method to help with chargebacks – especially from new and very large players. The model operates on an insurance basis – the good volume offsets the bad, keeping approval rates high and fees low. If we start cherry-picking which transactions go to these providers, we’re messing with that delicate balance.
The result? Lower approval rates and higher costs from the guaranteed models, which ultimately hurt our players and gaming operator bottom lines.
Let there be no doubt – the non-guaranteed models operate at a much higher margin, as they’re just a data call. They have no incentive to protect an operator from losses. A data provider in open banking operates as a dumb pipe with a risk score, putting all of the returns burden on the merchant with limited visibility into real-time network activity. If the guaranteed model goes away, merchant total costs of payments will go up.
There is, however, a silver lining in all of this. Open banking technology isn’t just about risk assessment – it’s also a powerful tool for promoting responsible gaming. By analyzing transaction patterns and account history, we can identify potential problem gambling behaviors early on. This not only helps us fulfill our ethical obligations but also supports the long-term sustainability of guaranteed payment products.
So, what’s the takeaway here? While payment steering might seem like a smart strategy on the surface, it’s crucial to consider the bigger picture. We need to balance cost optimization with customer experience, risk management with payment provider relationships, and short-term gains with long-term sustainability.
My advice? Think carefully before implementing aggressive payment steering tactics. Instead, focus on leveraging technology to enhance risk assessment and promote responsible gaming. By doing so, we can create a win-win situation – one that benefits operators, payment providers, and most importantly, our players.
Remember, in the world of gaming payments, sometimes the smartest move is to play the long game.
