Millions of young die-hard sports enthusiasts are hooked to fantasy sports. Baseball, Football, Hockey, Cricket, Soccer being the most popular fantasy sports websites.
What better way to make yourself a part of a sport you absolutely love? It only gets better with your friends and family joining in the virtual game.
This recreation sport may have only begun as a means of fun among friends but is now a booming billion dollar global industry. Billions of dollars are being invested in virtual game platform across various sports pursuits and last checked, the industry is generated $7.22 billion revenue according to a research conducted by Ipsos Marketing.
Fantasy sports are played both on a desktop as well as on smart phones. With a demographic consisting of largely young players, the use of mobile phones to play the game has increased significantly in the past years. Online platforms being the primary source of fantasy sports, it becomes vital to provide online credit card processing services to its participants.
Although with the industry being categorized as high risk, obtaining regular merchant services for credit card processing is an uphill task for fantasy sports merchants.
Why is Fantasy Sports considered as a High Risk Industry?
Despite being a flourishing money making industry, financial institutions refuse to engage with these merchants and are quick to decline their applications.
- Fantasy sports business is also known as the most popular type of virtual sports betting. With the games being largely viewed as form of gambling, its nature of business becomes controversial and hence placed under the high risk bracket by banks.
- Another major issue being the industry is plagued with customer-initiated chargebacks due to its high ticket price.
- Recurring billing or subscription-based billing results in a lot of cancellations and refunds.
- As with games, there are winners and losers. While some are a good sport about being on a losing team, merchants also encounter a significant percentage of defeated players who file fraudulent chargebacks after losing to avoid paying.
- Betting is a greedy game. In an attempt in rack in more, players end up with a huge bill and then try to cheat the chargeback system to play for free. This is called friendly frauds.
- With the industry being heavily regulated, ensuring strict compliance of rules by merchants puts tremendous burden on the underwriting team processing the application.
- Sponsor banks follow a strict policy against high chargeback ratio. If a merchant’s chargeback exceeds a certain limit, the bank is quick to shut down the account as well as charge the processor a heavy fine.
- When chargebacks go unpaid by the merchants, it causes a huge financial risk to banks and credit card processors making them extremely cautious about accepting businesses with a possibility of high chargebacks.
- The payment methods that fantasy sports merchants heavily rely on are online, virtual terminals or MOTO which are susceptible to fraud.
- Excessive liability coupled with uncertainty makes it a high risk industry.
How do I obtain a High Risk Merchant Account for Fantasy Sports Business
You have your fantasy sports website up and running but no way to accept payments since you have discovered that the industry you operate in is considered high risk. What are your options now?
Instead of running pillar to post searching for a decent bank or credit card processor to take on your business or getting accepted and later having your account frozen during the reviewing process by online payment aggregators like PayPal or Stripe, start seeking reliable merchant account providers offering high risk merchant account solutions.
Now, you may have a long list of providers to offer their services but it is important to scope out and pick one who knows the ins and outs about fantasy sports business and have experience with the industry at large. Those being familiar with the nuances of the industry certainly help during the underwriting process of your business. Processors with a long-standing relationship with their sponsoring banks are an additional advantage.
When determining risk, an underwriter will study various factors and seek reassurance that the processor will not be saddled with the responsibility of clearing chargebacks caused by the merchants. High chargebacks and faulty business with questionable practices is the recipe for quick merchant account denial.
Reputable, law-abiding and a smooth functioning website with regular updates are the basics required from a merchant’s end for a smooth merchant account approval process.
