UK licensed gambling operators: Beware MSBs that do not block credit card deposits into e-wallets

As we have previously reported, the new licence condition 6.1.2 (that came into force on 14 April 2020) prevents UK licensed gambling operators from accepting payments by credit card either directly or through any Money Service Business (“MSB”) – such as an e-wallet or other fintech and electronic money institutions enabling e-money transfers – which allows credit cards deposits.

The Gambling Commission has today (10 June 2020) published “Guidance on credit card payments made through Money Service Businesses” (that you can download below), in which it states:

The Commission’s recent ban on credit cards extends to payments for gambling made by credit card through any money service business (MSB).  

The new licence condition 6.1.2 prevents gambling operators from accepting payments by credit card either directly or through any MSB (such as an e-wallet or other fintech and electronic money institutions enabling e-money transfers) which allows credit cards deposits.    

One of our key intentions in banning gambling with credit cards was to maximise the levels of friction during the process of accessing and using borrowed funds for gambling, in order to reduce the risk of consumers experiencing harm from gambling with borrowed money. 

It is important for operators to ensure that the credit card ban cannot be easily circumvented by simply topping up an e-wallet or online money transfer account directly from a credit card, where those funds could then be used for gambling with very little friction in the transactional process.  

We explained in the credit cards consultation and in our responses that this would mean that operators could not accept any payment through an MSB unless the MSB has prevented the use of credit cards for gambling through their services. This includes, for example, circumstances where an MSB allows its customers to transfer funds from a credit card into a wallet or account which could then be used by the customer to make gambling deposits.  

For clarity, and further to specific queries raised by operators, this includes electronic money institutions such as Revolut which has confirmed that its customers can add money using credit cards. Operators must therefore put systems in place to prevent gambling payments from these products.  

However, it is important to note there may be other e-money businesses which operate a similar service to Revolut and which also allow their customers to make credit card deposits which then could be used for gambling.  

Operators are therefore reminded that they must take the following course of action before accepting customer payments via any MSB (including through any card payment instruments issued by those MSBs to its customers):

  • operators must satisfy themselves that customers of that MSB cannot fund their e-accounts or e-wallets with credit card deposits and then use those funds for gambling.  
  • operators will need to reject all payments made through such MSBs that have not developed a ‘block’ to prevent credit card deposits being used for gambling through their e-account or e-wallet facilities. 

This guidance is in line with a January 2020 article for Payment Expert entitled “Licensing expert David Clifton on the wider ramifications of the UK’s regulatory clampdown”, in which David addressed the question: “Could the onus fall on credit card companies and e-wallet providers to ensure that the credit card ban is observed?”, answering it as follows:

Neither credit card companies nor e-wallet providers are regulated by the Gambling Commission so no onus falls on them from a gambling regulatory perspective.

However, the Commission has said that the new licence condition 6.1.2 imposing the ban with effect from 14 April “will impose a responsibility on operators to only accept payments via e-wallets in circumstances where the wallet provider can assure the operator that they can prevent payment for gambling by credit card”.

It therefore urges operators “to make contact with their third-party wallet providers whose payment facilities are made available through the operator’s website or app, to ensure they understand how the wallet provider intends to proceed”.

As a consequence, e-wallet companies will need to work with credit card companies to ensure that the former can “demonstrably prevent the use of credit cards for online gambling through their wallets”.

The three largest e-wallet providers in the gambling market have apparently told the Commission that they can build a solution but smaller providers will need to decide whether to develop their own solution or instead withdraw from the UK gambling market altogether. You can find more information in these respects at paragraphs 3.77 – 3.79 of the Commission’s Consultation Response document.

This topic will no doubt feature in a panel session entitled “Gambling Payments & Self-Governance” that David Clifton will be moderating as part of the CasinoBeats Malta Digital conference on Wednesday 1 July 2020, further details of which you can find here.  

UPDATE: You might also be interested in our subsequent website posting entitled “Cashless payment technologies in land-based gambling premises: a reminder”