Unfortunately for GEs around the globe, the technology surrounding payment systems—and particularly CA solutions—has been stagnant. Historically, local banks provided standard POS devices and merchant services to GEs as part of a broader banking relationship to facilitate debit and credit card cash advances. This model remains true in dozens of markets around the world. In more advanced CA markets, proprietary software has been developed by Value Added Resellers (VARs) to provide added functionality to the transaction process, benefiting both the patron and the operator. VARs become the Merchant Services Provider (MSP) to the GE, and the VAR negotiates an MSP agreement with a large local payment processor or bank. Although a step up from standard POS devices, legacy VAR systems are tired, represent serious PCI risk, offer little to know customer behavior analytics and pale in comparison to the innovation we see in the broader merchant-processing vertical where the likes of Stripe, Braintree, and CardConnect seem to evolve and offer exciting new technology on a daily basis.
GEs have suffered uniquely as banks only reluctantly provide CA services due to the potential brand risk associated with responsible gaming and problem gambling. As a result, banks haven’t invested in technology for the GE and only offer non-branded, off-the-shelf POS terminals, which don’t facilitate the unique requirements of a CA transaction. VARs who established an early footprint in some markets – namely North America – simply stopped innovating or failed to execute.
Kurt Sullivan, Chief Operating Officer of Passport Technology, a highly advanced VAR in the CA space, states, “I’ve been in gaming and payments for over forty years and never has it been more important for CA and GE partners to collaborate and trust one another as we co-develop ‘smart’ solutions which touch almost every aspect of their cash, treasury and patron operations. It’s what we are focused on and a real point of difference.”
GEs still deploying CA services through a standard bank POS device can be assured the missed opportunities—cash to the gaming floor—are endless. For example, the bank must apply a Merchant Category Code (MCC) to the transaction type, providing the card issuer critical information associated with the MCC during the authorization request. An “MCC 7995” transaction, which 99% of all bank-provided POS devices carry, indicates a card-present purchase of chips at a land-based GE or an online gaming transaction. The challenge is that the card issuer does not have enough information based on this broad MCC, and this historically results in a significantly higher percentage of declines and referrals versus the more CA-specific MCCs that VARs employ.
You may ask, “Why is this significant?” When a patron’s transaction is declined at a GE, they generally attempt lower transaction amounts to gain an approval, which can set off a vicious cycle. As the authorization requests and declines add up, the card issuer may trigger a velocity check and place a hold or block on the patron’s bankcard. With the patron’s urgency building and frustration peaking, it’s likely the patron or GE employee will be stuck on the telephone attempting contact with the card issuer to address the issue.
If the authorization attempt results in a referral, the card issuer is instructing the GE to have the cardholder contact the card issuer to provide required information. Approximately 60% of referrals result in an approval if the cardholder makes contact. It is important to note that most referrals are higher average transaction amounts (generally 80–120% higher than the average non-referred transaction), and a process should be available to facilitate the approval of referred transactions.
Further complexities arise as patrons visiting a GE are often on vacation, away from home and using their bankcards more frequently and for different purposes, which triggers additional card issuer velocity checks. Card issuers will velocity check, flag, or outright block authorization requests if there is a report of fraudulent activity within a specific geography or within an industry and specifically in markets where payment security technology like EMV (Chip and PIN) has not been deployed; e.g., the US. All of these known and unknown influences impact bankcard authorizations, and the use of MCC 7995, as a card-present, face-to-face transaction in a GE is the worst possible start.
All of this confusion and frustration contradicts the overriding mandate of the GE to provide patrons with a unique, enjoyable, and memorable experience. Increased lines at the cashier and POIs, frustrated patrons, abnormal CA decline rates, and less cash on the gaming floor will all be minimized as the CA industry adopts, develops, and embraces the importance of calibrating the CA machine at every turn – starting with the MCC.
The CA vertical settles more than $30 billion in annual bankcard volume, generating billions in annual payments revenue and impacting the gaming experience of millions of patrons. Operators should expect much more innovation, reliability, and diligence from their CA providers, whether banks or VARs. Passport Technology and a few other providers have stepped up in developing proprietary software designed to increase cash to the floor, improve the patron’s experience, manage responsible gambling, and provide the operator with tools to calibrate their CA systems in real time. Features to consider:
- Dynamic messaging throughout the transaction flow
- Authorization attempt limits (number and amounts)
- Smart routing to preferred transaction type and fees through POI (brick-and-mortar and online and pre-paid debit)
- Real-time fixed and variable fee changes
- CA available funds messaging flow (“helping patrons fish for approval”)
- Real-time dispense and bill break decisioning
- VIP alerts on valued customers and problem-gambling specific patrons
- Real-time settlement and corporate / location pre-fund reporting
- Reporting and settlement by employee, position, shift, event, gaming day, or calendar day
- AML reporting and alerts
The notion that a GE should simply match the CA fees or technology from the competitor down the street is not an acceptable approach in 2017. Although you can’t see it, the dynamics at play when a patron is seeking to access cash and presented with a fee for the transaction and rationalizing to “accept” or “decline” is compelling. Whether a resort property or a local casino, the basic concept rings true throughout the world.
You can read part two of this article in our February issue.