Things aren’t looking too promising in the sweepstakes world, as several sweeps payment processing restrictions apply pressure on the industry. These changes have come after Visa and Mastercard decided to implement stricter merchant rules for sweepstakes casinos.
Want to learn more about these changes and see an overview of the payment processing industry for sweepstakes sites? Then keep reading. This post details the impact of potential changes to sweepstakes merchant classification, tougher regulation, and how different payment processors affect Sweeps Coin redemptions.
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Merchant classification for sweepstakes casinos
Both Visa and Mastercard enforce strict categories for high-risk and restricted industries by using Merchant Category Codes (MCCs). The MCC 7995 code is reserved exclusively for the gambling industry, and processors now argue that sweepstakes sites should fall into this category.
How an MCC 7995 could impact transactions
For organizations under the MCC 7995 banner, processing fees are often increased for debit and credit card payments, including Visa and Mastercard. Additionally, operators will likely experience higher chargeback rates, which is a significant risk for new social casinos that rely on voluntary Gold Coin purchases.
Annual subscription fees for MCC 7995 merchants
MCC 7995 businesses are required to pay annual subscription fees, which are typically more expensive than those in lower-risk categories. Ultimately, this cost will only be passed onto the consumer through more expensive Gold Coin bundles.
Tougher KYC checks and regulatory compliance
Sweepstakes casinos are legal in most US states, but not all of them. Because of this, payment processors face extra scrutiny if they are seen as handling transactions from residents in restricted states. To reduce this risk, processors often require sweepstakes casinos to use highly accurate geofencing systems, typically with 95% accuracy or higher, to prevent users in restricted states from accessing their platforms.
This means that sweeps casinos are often forced to increase the standard of their KYC (Know Your Customer) verification processes. While this isn’t necessarily a bad thing, it could lead to a longer, more frustrating experience for new players.
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A limited number of options for Sweeps Coin redemptions
While sweepstakes casinos often provide a wide range of payment processors for voluntary Gold Coin purchases, there are often very few options when redeeming Sweeps Coins. In fact, most operators limit redemptions to purely ACH bank transfers. Here’s why:
The cost efficiency of ACH
While we’re sure many sweepstakes casinos would love to implement payment processors like PayPal, Skrill, Venmo, Visa, Mastercard, and others, it’s often expensive. And it’s not just the raw fees, which have a very real impact. It’s also the additional integrations, compliance reviews, and operational costs.
In contrast, ACH bank transfers work almost everywhere in the United States and are much cheaper to run. So the emphasis is really on the payment processors to make their offerings more competitive if they want to be considered.
Fraud and bonus abuse are a huge concern
Sweepstakes casinos have to deal with issues such as multi-accounting, stolen payment methods, chargeback fraud, identity fraud, and people attempting to redeem prizes on behalf of others. Many digital wallets, cryptocurrencies, and prepaid cards are easy to fake and hard to track, forcing sweepstakes sites to stick with ACH.
Final thoughts on payment processing restrictions for sweepstakes sites
There are many challenges currently facing the sweepstakes casino world from a payment processing perspective. Whether it’s increased scrutiny or tougher verification demands, it’s certainly not an easy time for operators. But it’s not all doom and gloom, as the best sweepstakes brands continue to find a way to serve players through voluntary Gold Coin purchases and Sweeps Coin redemptions. Check the links here to find sweeps sites with great payment methods.
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