iGaming Daily

Ted Menmuir (00:00.086)
Mastercard and Visa have found themselves caught up in the seemingly never-ending debate on the parameters of UK gambling regulation. media investigation by The Observer found that both payment networks had been used by illegal operators to facilitate deposits of UK consumers with illegal websites. Strictly is raised on the wider safeguards against the black market's encroachment of UK gambling. Today's episode of iGaming Daily is brought to you by Optimu.

the number one CRM and marketing solution for the global gaming industry. I'm Ted Menmuir and joining me today, we have SBC News' new editor, Ted Orme-Claye and senior business journalist, Viktor Kayed. Gang, how you doing? Yeah, pretty good. Thank you, Ted. Congratulations on your new role as well as new SBC editor at large. You've got promoted as well, us a bit Let's not forget, mate. Let's not forget.

No, you know me, staying humble guys. So guys, let's kick off and Ted, I'll come to you and just tell us, why do you pick the story about Visa and MasterCard and their black market exposure? Yeah, cheers, Ted. So yeah, to answer that, the reason we decided to talk about this is because it's not too often that we see a story

come along like this that really sort of shows the importance of payments to the betting side of things, but also showcasing this topic of the black market that has been quite heavily and intensely debated in the UK over the past few years. Obviously the industry in the context of lots of incoming regulations of the gambling act review and the need to modernize British betting legislation has often borne about what it believes

could be the negative impact of over regulation, know, and then this basically assisting black market operators to count that a lot of the reform and sort of lobbyist groups have kind of argued that this is overhyped, that there isn't as much of a black market. So this story really gets to the heart of that as showing that obviously there are some platforms do exist and kind of the impact they have on customers and how they are.

Ted Menmuir (02:23.957)
they are facilitating the deposits here. In this case through Visa and MasterCard, which are two of the biggest payment, the two biggest payment processes in the world. Yeah. Yeah. I mean, it tells the story of just the scope of the black market now. Yeah. A hundred percent. So Victor, let me turn to you and the MasterCard and Visa story. look, MasterCard and Visa are without doubt the

giant payment networks, I think they probably account for anything above 95 % of all kind of credit transactions. Yeah. Maybe even more. Maybe even more. Right. So what is kind of their accountability or liability of processing gambling payments, but gambling payments for illegal operators? Well, let's just start off with the fact that they do not want to be in this position. This is a very bad image for them.

for any company really being associated with criminals, essentially black market activity. So this is a very bad image and they would want to make sure that they take the necessary measures to remove themselves out of this scenario. However, what I want to say here is that although it might seem like it, Visa and MasterCard

are not directly responsible for this. this is something of Ted's specialty. There is actually a payment acquirer, payment orchestration platform that stands between the merchant, i.e. the black market website, who takes the deposits and sends them over to Visa and MasterCAD. So Visa and MasterCAD, although

obviously present with their logos and their payment schemes on these websites. are not directly responsible for appearing there. So it's quite an interesting situation. Ted, look in these, you know, investigations or articles, but have they got the actual context of what was, how the legal payments were transpired? going back to

Ted Menmuir (04:49.017)
visa in MasterCard. mean, aren't they just the kind of, you know, the web server or the, you know, the equivalent of the web server to view something illegal online, as in the soap being that everyone uses them that, you know, they don't really have control over a situation of where people are spending their money. It's actually not their, you know, it's not their duty.

Yeah, to answer your first question, Ted, mean, the Guardian, the Observer, should say, the Guardian's Sunday paper, were the ones who broke this. I think they did actually, if you read the article, they did break down the whole process quite thoroughly. Obviously, they did lead with the headline and the intro and so on of MasterCard and Visa being used to facilitate illegal gambling payments and so on. But yeah, they did mention, as Victor pointed out, the importance of the acquirers to this.

the third party platforms that connect merchants with Visa and MasterCard. These were obviously the ones who provided this connection between these illegal gambling sites and the Visa and MasterCard networks. So yes, it's very important for people to kind of look beyond the headlines of this one and read into it a bit more that the takeaway shouldn't be that Visa and MasterCard somehow have deals with these illegal gambling firms. It's not like the CEO or whoever is a fat

hire at casino was having meetings with the MasterCard boardroom. It's nothing like that. It's obviously, it's this acquirer. We reached out to Visa and MasterCard and they both highlighted the importance of their acquirers doing the necessary due diligence on the merchants that they partner with. Visa has quite an extensive integrity

Program I think it's called like a guideline for their merchants to it not merchants. Sorry They were there require our partners to adhere to so yeah I think your analogy with them almost being like the the internet Yeah, the internet provider the web browser that someone is using to view illegal content or you know Do elicit messaging or whatever it's it's it quite apt Yeah, that that does make a lot of sense it in terms of this dynamic

Ted Menmuir (07:10.161)
the responsibility is on the acquirers, not necessarily Visa and MasterCard. But maybe there could be an argument here, perhaps from a regulator standpoint or from some of the lobbyists standpoint, perhaps MasterCard and Visa need to do, and other payments providers need to do more to sort of police their relationships with acquirers and the connections with the merchants that might be going on through those. But surely Visa and MasterCard, mean, know, multi-billion pound organisations.

You know, they do check their networks and they do have relationships with authorities of what they are seeing, especially with regards to high risk sectors such as finance and gambling. Isn't that already in place? Yeah, it will be extensively. As you say, these are two multi-billion pound companies. made the point earlier that they'll account for what, like 90, 95 % of all transactions worldwide, really. The Visa and MasterCard are...

the only competitors to each other. I think that's quite a good point to hammer home there to show you how big these companies are. So yeah, they're involved in extensive regulatory engagement, working with authorities. I mean, interestingly, on the payment side of things though, they have kind of found themselves getting some criticism from some regulators. This is a complete, I'm going on a tangent here, but this is completely unrelated, but the...

I know that the PSR has been evaluating whether their dominance over the UK card market is causing problems for businesses with rising charge fees, intercharge fees and things like that. obviously, they're not always going to, like any major company, they're not always going to have a completely rosy relationship with regulators. But yeah, like you say, they are going to be carrying out lot of diligence themselves and ensuring integrity.

standards across their relationships. I think in this case it's just something some things have clearly fallen through the cracks and some acquirers have been not doing those checks that they're required to do, that Visa and MasterCard will require them to do and the end result is being that some customers have been able to place bets on these dodgy platforms and by the looks of it quite a few of them have lost money even in the you know some of them

Ted Menmuir (09:25.156)
It wasn't just placing bets and losing bets. Like they actually won money according to the Guardian article. They won money and then were unable to withdraw it. So, you know, so there's been quite a, quite a major flaw there. pretty, pretty rogue stuff here. Victor, how are these, you know, payment networks being exposed by criminal gangs? I mean, what methods are they using to kind of qualify?

their websites to say that these aren't gambling transactions and how are they kind of blinding themselves away from kind of any regulatory scrutiny? I'm not sure about the mechanics behind it because if I was maybe I would be doing the same, but what I can say is that it's obviously

they're not going to contact the acquirers or the card scheme saying, we are an illegal gambling company. Can we use your services? So to use these services, the only need to register is a merchant. And correct me if I'm wrong here, Ted. I'm not sure, Ted Ose. Neither MasterCard or Visa or any of the payment acquirers have the legal obligation to check whether

the transaction is from a gambling website first of all and second whether that website is licensed for example in the UK or not. does not fall under the remit of Master Carro Visa nor any payment acquired. So it's actually quite easy to game the system I guess.

by just registering as a merchant and going to one of these companies, paying the correct fees and getting them on board for your website. No one checks whether or not you're a legal gambling regulator until one of these, until an investigation like the one from the observer catches you or you catch the attention of the UKGC. Just building that thing.

Ted Menmuir (11:36.14)
I think Visa and Mastercard do have a commitment with, we talked earlier about their engagement with various regulators, as you'd expect from them as such massive enterprises. I think they have got a commitment to not process these sort of illegal transactions. But as Victor said, the way that the companies like these illegal operators will get around it will be by disguising the nature of their business and not going out there and just straight up going to an acquirer like Victor said going, hey, we're an illegal gambling site.

do want to process a transaction for is it will be to, as he said, just register as a merchant and disguise the nature of what it is they're actually doing. Even the agreement that you just mentioned, it's from 2014. Yeah, it's quite old, isn't it? It's between MasterCard, Visa and PayPal and the UKGC. However, it's completely voluntary. they are not...

They are not in danger of being legally scrutinized if they miss something within this agreement. even this agreement is voluntary. So there is a lot of gray area that bad actors can really leverage. That's very interesting from Victor. And I'm just going to throw this out to you guys, just as a final question on this matter.

If you take UK Gamma and Commission, it's got an increased focus on tackling illegal gambling activities, but what is the exact scope in this specific area of payments, which has got such a wide network and there's so many kind of components to how a payment is transacted online. think the issue we might come across here is a bit of regulatory fragmentation really. mean, the UK GC.

It has stated in the past that it's aware of goings on in financial services and financial technology sectors. They said throughout the gambling act review that they want to see the industry, the betting industry, pay more attention to goings on in finance and try and learn from it, particularly in data sharing. It also said a lot that it was keen on keeping an eye on like new and novel products that might cross over between betting and finance like

Ted Menmuir (13:57.264)
particularly blockchain and crypto sort of ones and NFTs which were quite big at the time. The thing with the payment side of stuff though, that's not really their focus. mean that's obviously is something more for the payment systems regulator and the FCA which it seems that the government are looking into the idea of merging those two agencies anyway. The UKGC from the statement we saw and from just other information we've seen of them is really more preoccupied with

countering just the proliferation of the illegal betting sites looking more at the sort of licensing and regulation of betting side of things rather than payments at least from what I've seen anyway. So to answer your question there Ted, maybe there is just some more room or a need for the UK GC to work a bit more with the FCA and PSR and whatever combined entity may or may not result from those two.

to really get more of a handle over the payment side of things and help take down these illegal companies. obviously if you deny the ability to put a payment onto them, that's the biggest blow you could deal them really. The thing is, I agree with everything that you said except the last part. If you intervene and tell these big companies to not accept payments from those websites, they can easily close down the website.

open another IP address and deal from there. However, I agree with you about the regulatory fragmentation. In this certain situation, I think that the UKGC has several options here in my opinion. First, it is to ask for assistance from some of the payment regulators, for example, the FCA.

Because in this specific case, UK consumers are involved being defrauded from their money. The FCA could easily say, OK, we're talking about money laundering here. We're going to intervene. And they can directly influence MasterCard and VISA's powers. Like you said, the other regulator that can potentially get involved here is the payment systems regulator.

Ted Menmuir (16:17.54)
previous history with MasterCArD and Visa, scolding them about their monopolistic market ambitions in the UK. there is a potential from here, Vizel. Unfortunately, I think that there is quite little that the UKGC can do in this specific case except one drastic measure, which is a measure that is guaranteed to be effective.

to reach out to all the UK licensed game suppliers or game aggregators and tell them, listen guys, your games are on these illegal websites. If you don't take the necessary measures to ensure they do not reach these websites, your license could be in danger. This is a very drastic measure as I said, but.

It could be the only thing that the UK GC can do in this case. Okay guys, I think we covered a lot of ground today. So thank you Ted and thank you Victor. been great insights offered. And to our listeners, thank you for tuning in today.