Daily fantasy sports, also popularly known as DFS platforms, basically sit in a regulated gray zone. Such platforms are basically a combination of gaming as well as skill-based competition. Because of such factors, most of the standard payment processors avoid supporting merchants in this industry.
This is primarily because of the chargeback exposure from user deposits. Along with that, the regulatory variation across different nations and different states is also a critical factor in why standard payment processors simply avoid this industry. In many cases, such businesses are also classified under gaming laws that basically categorize such merchants as extremely high risk, and many processors are not very comfortable with such an industry. This simply means that DFS applications, or daily fantasy sports applications, most of the time require a high-risk merchant account setup and not a generic payment solution.
If you are searching for a payment solution for your daily fantasy sports application or website, then you must look at certain features that cannot be ignored.
- To run a smooth and truly scalable DFS platform, your payment processor must support instant deposit and fast withdrawal. This is critical because it can directly impact the user retention.
- Along with that, they should also support wallet-based transactions. This is because users find it easy to manage their balances.
- The processor should also provide recurring as well as microtransaction features for contest entries.
- The fraud and risk monitoring tools should be advanced, and these are extremely critical to prevent abuse.
Without these features, the user experience as well as the compliance all suffer, and eventually the life of the merchant account shortens. In the worst case, if your merchant account gets terminated, then you may have to wait for multiple years to get another account.
Now let us talk about compliance and licensing.
These are absolutely non-negotiable. Daily fantasy sports platforms must align themselves with jurisdiction-specific laws. Your payment service provider will evaluate your application on multiple factors. They will check your licensing. or will ask for a legal opinion for your business operation.
Along with that, they will also ask for clear terms and conditions around skill versus chance operation.
The underwriters at your payment processing company will carefully do the AML and KYC procedure.
Remember, if your compliance structure is weak, then the chances of account approval also become weak. And I would say it nearly becomes impossible in this industry. So it’s better to comply with the rules and regulations and perform the business activities in the most disciplined and fully compliant way.
You should also know that even legitimate daily fantasy sports applications sometimes get declined. And most of the time, this is because their setup is not right. The common reason for the same is that such businesses generally apply under the wrong business model. They also lack the transaction flow clarity. Some merchants even have a poor chargeback management strategy.
All of this reduces the chances of high-risk merchant account approval. You must know that high-risk merchant account providers also need to follow the same rules which regular payment service providers follow. However, I would say that in the case of high-risk merchant accounts, the rules are even stricter. So the solution that will bring you success, is that you should have a proper underwriting presentation with proper merchant category alignment.
We are sure that you know that daily fantasy sport is not just about collecting entry fees. It is about building a trusted environment for your users. With the right merchant account acquiring relationship and proper infrastructure, you can get high approval rates, truly stable processing, and the ability to scale globally.
QuadraPay works with various payment service providers that are open to evaluating daily fantasy sports merchants. They offer high-performance payment systems so that you can focus on growth without struggling too much to find the right provider.
If you have any such requirements at this point in time, or if you are upset with your current payment service provider, then feel free to contact QuadraPay, and we will match you with the right provider.