Once confined to gas stations and grocery stores, lotteries and sweepstakes have now moved online. Convenient and promising, online lottery is becoming one of the most popular forms of gambling. In 2021, the US online lottery market was worth $2.3 billion. As more states head towards legalizing the game, having an online lottery business can help you hit the jackpot.
While there’s plenty of money to be made, getting started in this industry can be an uphill battle. Banks consider this industry high-risk and refuse to provide merchant accounts for online lottery or sweepstakes businesses. If you don’t have a merchant account, you can’t process online card payments. This will make it almost impossible to run a viable online lottery business.
Specialists in high-risk industries, SeamlessChex can help you access the online payments system in no time. Check out our range of high-risk payment processing products for lottery/sweepstakes businesses to find the ideal solution for your needs:
Offline lottery is legal in 45 states. Online lottery, however, is a different story. Only eight US states have legalized online lottery as of 2021. Due to the prevalence of lottery scams, the industry is heavily regulated by federal and state governments. If you operate in a state where online lottery is illegal or sell tickets across state lines, you can get into trouble with the law.
Avoiding legal quagmires is one reason why banks don’t offer merchant accounts for online lottery or sweepstakes businesses. In addition to compliance issues, the industry is plagued with many other problems that make it too risky for banks to work with. Here are some reasons why you need specialized high-risk payment processing for your lottery/sweepstakes business:
The time it takes to receive your money from an online casino varies depending on factors like the casino’s policies, the withdrawal method you choose, payment methods offered, etc. ACH bank transfers are usually the fastest, with funds available between one and four business days. If you initiate deposits from your eWallet, however, funds will be available on the next business day.
While PayPal is one of the most common platforms for transferring gambling payouts, other alternative payment methods exist. They include credit and debit cards, e-wallets, gambling-specific payment apps, bank transfers, cryptocurrency, checks, wire transfers, and prepaid cards, to name a few.
No. Individuals cannot withdraw funds from a merchant account or put funds into it like they would with a business checking account.
Because merchant accounts are “pass-through” accounts that allow businesses to accept customer payments, they’re not usually designed to facilitate individual withdrawals or support personal use.
Merchant accounts are established with the backing of payment processors or financial institutions. Until the funds from credit and debit card payments are authorized and settled, they sit in the merchant account.
In many cases, using funds from a merchant account for personal purposes is subject to penalties or fees.
A gaming merchant account is a specialized type of merchant account designed to allow businesses in the gaming industry to accept payments from their customers.
Gaming merchant accounts are suitable for various gaming-related businesses, including video game publishers, online casinos, sports betting platforms, and other merchants that provide or sell gaming-related products or services.
Online casinos offer a variety of payment systems or ways for players to deposit funds into casino accounts and withdraw the money they won.
The availability of payment systems varies from casino to casino but usually includes options like credit and debit cards, e-wallets (including PayPal), bank transfers, prepaid cards, cryptocurrencies, mobile payment apps, voucher systems, checks, pay-by-phone systems, and in-person deposits.
A merchant account and a payment provider are different players in the payment processing industry, but they serve different purposes.
Merchant accounts are owned and operated by a business or merchant and established with the backing of a financial institution, like a bank or payment processor. Merchant accounts allow companies to accept payments from customers and process transactions.
On the other hand, payment processors are the behind-the-scenes gateway that facilitates the processing of payment transactions. Payment providers allow businesses to accept various forms of payment, including credit and debit cards.
When a customer initiates a transaction, the payment processor handles the secure transmission of payment data from the customer to the merchant’s point-of-sale system and the acquiring bank.
Payment providers ensure security and compliance during transactions and usually charge a per-transaction fee.
Online lottery businesses must process card-not-present (CNP) payments to fulfill transactions. CNP transactions are more vulnerable to fraud than in-person payments. Accepting CNP payments exposes you to more chargebacks, making your business high-risk to banks.
Another reason why you’re struggling to get a merchant account for your online lottery business is the high rates of dissatisfied customers in the industry. It’s common for people that lose lotteries or sweepstakes to dispute the online payment so they can get their money back.
Online lotteries can process thousands of transactions per month. More transactions increase the likelihood of fraudsters using stolen card data to make online payments. Once the real cardholder discovers the unauthorized transaction, they will contact their bank to reverse the payment.
SeamlessChex has more than 15 years of experience serving the payment needs of gambling businesses. We are aware of the challenges in your industry and have developed effective solutions to help you overcome them. Leveraging our 25+ banking partnerships, we’ll underwrite your business and help you get a merchant account for online lotteries in no time.
Getting a merchant account is only the beginning. In an industry rampant with scams and fraud, preserving your account is the real struggle. SeamlessChex will work with you every step of the way to protect your merchant account from the risk of termination. With our cutting-edge chargeback reduction technologies, you can minimize fraud and increase your profits.
Our high-risk payment processing solutions for lottery/sweepstakes merchants:
With decades-long expertise and advanced payment technologies, SeamlessChex is the best high-risk processor you can find. Sign up for your free trial now to see how our payment solutions help your business grow. If you have any questions about our online lottery payment services, reach out to us so we can help.
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