Web Wagering Firms Try to Entice Banks

By Keenan, Charles | American Banker, March 2, 1999 | Go to article overview

Web Wagering Firms Try to Entice Banks


Keenan, Charles, American Banker


By CHARLES KEENAN The product may be touted as a "home ATM and smart card" or a "global debit card"- terminology that might pique any banker's interest and, perhaps, raise concern about competition. But these are words being bandied about by companies in the Internet gambling business, which is of dubious legality in the United States. Countless small companies have found ways to skirt domestic laws and let people wager on-line-on sporting events, casino-style games-even President Clinton's impeachment trial. The firms work through banks and computer servers in other countries- many in the Caribbean-and get foreign merchant processors to help them accept MasterCard and Visa payments. U.S. residents might be given a free bank account in the host country, which can be funded from afar with a debit card or credit card cash advance. U.S. banks and transaction companies have turned their backs on this activity, but some overseas institutions have been more flexible. Barclays Merchant Services, a division of Barclays Bank PLC in London, is handling card transactions for at least one on-line casino operator. In the United States, banks are more intent on figuring out how to support current merchant customers. "Most banks wouldn't touch a gaming establishment," said Donna Embry, senior vice president of Vital Processing Services in Tempe, Ariz. "Add to it the Internet, and you have double jeopardy." On-line casino operators are doing all they can to get U.S. banks and processors to play-and lend some legitimacy to these enterprises. That may help explain their adoption of common payment-system terminology, which could cause confusion about their status. One Las Vegas company, which uses the name eConnect - but has used several other names and addresses - is marketing a "home ATM" device that lets people place wagers by credit card. It aims to install 5,000 terminals in public locations by next February. Winners Internet Network Inc. of St. Augustine, Fla., said in a recent press release that it wants "to build and maintain a series of global shopping malls utilizing the 'WINR' credit card processing and proprietary currency conversion software." Its processor, Cyberlink Monetary System, is described as a Liechtenstein company. Many processors are awaiting the outcome of legislative efforts to regulate Internet gambling, and listening to predictions that legalization is inevitable. "Internet technology renders prohibition futile," Tom W. Bell, director of telecommunications and technology studies at the Cato Institute, said in testimony last May to the National Gambling Impact Study Commission in Chicago. "Consumer demand for Internet gambling and the states' demand for tax revenue will create enormous political pressure for legalization." "U.S. businesses are losing revenues, and offshore businesses are making money," said Timothy Miller, senior group vice president of operations at Cardservice International, one of the independent sales organizations that specialize in signing up risky merchants for card acceptance. Cardservice, based in Agoura Hills, Calif., has refrained from serving Internet casinos, though it has embraced other Internet merchants with high fraud and chargeback rates. But the company is intrigued by predictions about growth and profits in this sector. "Visa and MasterCard need to draw a line in the sand," Mr. Miller said. "There are no specific rules or regulations that say, 'We do not allow Internet gambling.'" In December, Visa distributed a memo that said on-line gambling establishments could get into the merchant-acquiring network "only if they meet the global member risk-policy requirements established for high-risk telemarketing merchants." Visa U.S.A. spokesman Kelly Presta said the association's rules "allow the use of Visa products to purchase any service which is legal." Visa leaves it to governments to define what is legal. The policy has not shielded Visa from being sued by a California woman who amassed $70,000 in credit card debt while gambling on 50 Web sites.

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