The Hidden Costs of Payment Steering in Gaming

Payment steering sounds great on paper. After all, who wouldn't want to route transactions to the most cost-effective rails? But in the complex world of gaming payments, what seems like a smart business decision on the surface could be undermining the very infrastructure that makes our industry work.

The real price of forced choice

Every player has their preferred way to pay. It's not just about convenience – it's about trust and habit. When we force players to abandon their preferred payment methods, we're not just creating friction; we're potentially pushing them toward competitors who offer more flexibility. In an industry where player acquisition costs are sky-high, it’s a risk we can't afford to take.

Consider the player's journey. A newcomer starts small, testing the waters with modest bets. They're comfortable, they're building trust. Then, when they're ready to increase their stakes, we suddenly tell them they need to use a different payment method. This isn't just a bad user experience – it's a conversion killer.

The AI learning curve

Pay by Bank powered by Open Banking technology has become a cornerstone of gaming payments through Trustly for good reason. It offers high limits and unprecedented visibility into player financial health. But here's what many operators miss: these systems need consistent transaction flow to maintain effectiveness.

AI-driven risk assessment isn't static – it's constantly learning and adapting. When we artificially restrict transaction flow through payment steering, we're essentially putting blindfolds on our most sophisticated risk management tools. The result? Less accurate risk assessment and potentially higher fraud rates.

The guaranteed payment paradox

The gaming industry has long relied on guaranteed payment providers to manage risk, especially for new players and high-value transactions. These providers operate on a careful balance – using revenue from low-risk transactions to offset losses from riskier ones. This model has kept approval rates high and fees reasonable.

But payment steering threatens this equilibrium. By cherry-picking which transactions go to guaranteed providers, we disrupt their risk-management model. The inevitable result? Lower approval rates and higher fees for everyone. Meanwhile, non-guaranteed providers, operating with higher margins but no skin in the game, offer risk scores without assuming any actual risk.

Beyond risk scores

Let's be clear: a risk score from a data provider is fundamentally different from a guaranteed payment. When providers have no stake in the outcome, they have little incentive to protect operators from losses. Their business model thrives regardless of whether transactions succeed or fail.

The responsible gaming imperative 

There's another crucial aspect we can't ignore: responsible gaming. Open Banking technology provides invaluable insights into player behavior and financial health. By analyzing transaction patterns and account history, we can identify potential problem gambling early. This isn't just about compliance but building a sustainable industry.

The long game

While the short-term savings from payment steering might look attractive, they come at a cost. We risk:

• Degrading the player experience
• Weakening our risk assessment capabilities
• Undermining the guaranteed payment model that has served our industry well
• Compromising our ability to promote responsible gaming

A better path forward

Instead of aggressive payment steering, we should leverage technology to enhance risk assessment and promote responsible gaming. This means:

• Maintaining flexible payment options for players
• Supporting the learning capabilities of AI-driven risk assessment
• Preserving the balanced ecosystem of guaranteed payments
• Strengthening our responsible gaming infrastructure

In gaming payments, as in the games themselves, success comes from thinking several moves ahead. Let's not sacrifice long-term stability for short-term gains. The future of our industry depends on maintaining a payment ecosystem that serves all stakeholders – operators, providers, and, most importantly, our players.

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