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Online Transactions – Digital Responsibility to Geolocation and Payment Processing    

December 20, 2022 No Comments

by Christian Boyde

Sports betting online has become a $194.63bn global market with over 25,240 businesses according to Statista.com. In the UK, sports betting is a mature market with brick-and-mortar and online operators live and ready to take your bets. Since the US legalized sports betting in 2016, the US is now legalizing betting state by state. 

As these states go live, technical challenges arise in addition to the usual privacy, cybersecurity, trust, and consumer information protection. User location has become the focus of many operators in the US since not all states are legal yet, sportsbooks could be fined or even their license revoked if they take players from outside state lines. 

This very issue has been a hot topic for Ohio operators and their Ohio sports betting apps as they prepare for their launch on January 1, 2023. Every top US betting operator has their processes and technologies they used since launching in numerous states yet “virtual fencing” is not a task that is taken lightly.

What is Virtual Fencing and Why is it Important?

For those that are not familiar with the term “virtual fencing”, it’s a barrier built within a particular area, in this instance a state, using global positioning systems or RFID. It creates a fence around the state so users must be within state lines in order to place a bet.

Many out-of-state players drive into the legal sports betting state of their choice, download the app, open an account and place their bets. Once they leave the state lines, they are not able to place bets via the app or website. 

Who Oversees Geolocation Licenses in Newly Legalized Sports Betting States such as Ohio?

Every state handles its geolocation licenses differently. Tech company GeoComply was hired by the Ohio Casino Control Commission to license geolocation and ID verification services for sportsbook operators in Ohio. 

How will it be used? Operators will use the Player Location Check plugin to verify users’ physical location. This will be done via the player’s internet connection, permitting or blocking the bet from being placed if they are not within the Ohio state lines. 

The platform also shuts down location spoofing attempts like VPNs, public proxies, and SmartDNS proxies to name of few. 

Not only will this system keep sportsbooks compliant but also will cut down on possible financial fraud attempts. This is a huge problem in the legal market since depositing in a legal sportsbook is 10 times more difficult than depositing in an offshore sportsbook. 

Why is Depositing in a US Legal Sportsbook so Difficult?

In an interview with the CEO of Sightline, a US sports betting and casino gaming digital payments provider and apps developer, there is still a high level of friction when it comes to bettors being able to fund their accounts. Because of all the regulations both from a Federal and State level that are required to offer sports betting online. 

Geolocation and payment processing go hand in hand. For players to have the ability to fund their account, they have to get through the geolocation test first. Because of all these fiery hoops, bettors have to go through, it is suspected that at least 50% of users are not able to deposit into their accounts which is troubling for operators.

Will this improve? In the short term “No”. The need for more information from consumers is increasing and that causes abandonment. For those that provide the additional information, a third-party tech vendor such as Loqate/USPS needs to cleanse the data. 

Some data provided by humans have errors so a high-caliber fuzzy logic is needed to fill in any acceptable gaps. All those steps operators must oversee, including troubleshooting messages, error messages, etc. It’s a tedious project.

Many operators have now made peace with the reality that a third-party operator is needed to focus on both geofencing and payment processing issues. The impact on the business is too much and the learning curve is too big and evolving to try to have an in-house team handle it. Instead, the internal team works hand in hand with their tech vendor to monitor and improve the user experience.

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