Fintech’s Expanding Influence Within Online Sports Betting

The facts and stats don’t lie; the global online sports betting scene is exploding, but with big money on the line, payment security, and streamlined user experiences don’t always go hand in hand.

There’s a lot at stake as estimates suggest the global online sports betting sector is expected to swell to $120 billion by 2029, which at its current rate of 95% of betting conducted online, unquestionably makes it an attractive prospect for cybercriminals.

At the heart of the fight to ensure secure payment security across the spectrum of online gambling operators lay innovative fintech companies. They offer smoother digital transactions, enhanced security, and digital wallets with far faster payouts – a longstanding bugbear among online bettors.

Investigating this further, Techopedia delves into the financial technology sector and how the industry has become a key player in safeguarding a more secure, seamless, and enjoyable user betting experience.

Table of Contents Table of Contents

1. Key Takeaways
2. A Legacy of Online Sports Betting Payment Problems
3. How Is Fintech Solving These Problems?
4. Speed vs. Security: Fintech Is Striking the Right Balance
5. Fintech’s Fight Against Chargeback Abuse
6. FinTech’s Protection for Vulnerable Gamblers
7. The Bottom Line
8. FAQs
9. References

Show Full Guide

Table of Contents

1. Key Takeaways
2. A Legacy of Online Sports Betting Payment Problems
3. How Is Fintech Solving These Problems?
Show Full Guide
4. Speed vs. Security: Fintech Is Striking the Right Balance
5. Fintech’s Fight Against Chargeback Abuse
6. FinTech’s Protection for Vulnerable Gamblers
7. The Bottom Line
8. FAQs
9. References

A Legacy of Online Sports Betting Payment Problems

If you’ve ever bet using an online sportsbook, chances are you’ve encountered their clunky deposit and notoriously slow payout processes, which are often cited as necessary measures to counter the risk of fraud.

Prominent among the problems faced by sportsbooks is the constant battle to prevent fraudsters from using stolen payment details to place large, low-odds wagers, only to then cash out their winnings and disappear.

The toll of this criminal enterprise meant sportsbook operators were dedicating huge resources to blocking fake accounts, but often at the expense of frustrating genuine consumers in order to comply with often mandatory Know Your Customer (KYC) regulations. To do this, firms had to abide by the extensive protocols and regulatory compliances needed to collect people’s personal information.

The possible consequences of these came to a head in 2022 after the Better Business Bureau (BBB) had received over 2,400 complaints against BetMGM, DraftKings, and FanDuel – three of the largest sportsbook operators in the US.

Users at the time complained of excessively slow or glitchy withdrawal procedures, some of which had to wait weeks to access their winnings. In stark contrast, competitor Caesars Sportsbook had just launched its near-instant payout system in partnership with Ingo Money, leveraging its fintech innovations that acknowledged that in the fast-paced world of online betting, speed is everything to a consumer.

Another hurdle faced by bettors is the varying rules from state to state which can make payments a legal minefield at times. Designed to protect consumers from themselves as well as fraudsters, legislative restraints placed on sportsbook operators include banning credit card deposits.

However, while fintech cannot help resolve the credit card ban, it is aiding elsewhere in the effort to minimize additional security measures to adhere to strict anti-money laundering (AML) policies.

How Is Fintech Solving These Problems?

Perhaps the most visible fintech solution already available is smartphone-oriented biometric logins and AI fraud detection which facilitates customer entry without the elongated ‘User Name’ and ‘Password’ logins.

Nowadays, following a preliminary KYC setup of an account, a quick fingerprint or facial scan unlocks entry into an account or verifies all monetary deposits and withdrawals.

However, the biggest game-changer is the continued integration of blockchain and crypto payments in online sports betting. One high-profile firm actively embracing cryptocurrency is BetUS a Costa Rican registered offshore sportsbook where US citizens can deposit and withdraw funds using Bitcoin.

In theory, blockchain and crypto payments essentially cut out the middle person, which ultimately makes each monetary transfer faster and more secure, while also helping to combat chargeback scams (where fraudsters dispute sportsbook payment receipts) that currently plague the industry.

Of course, blockchain has also spawned a new form of gambling offering peer-to-peer contract transactions on crypto prediction markets such as Polymarket and Kalshi, which allows users to trade/bet using cryptocurrencies without relying on centralized authorities.

Yet, while blockchain betting contracts propose to offer a more secure form of betting, it is still subject to ongoing governmental investigations and litigation. It also has the potential to cannibalize the entire legal sports betting market – but that’s a whole different story.

Speed vs. Security: Fintech Is Striking the Right Balance

Like all eCommerce-based industries, fast transactions are ideal, but they can open the floodgates to fraudsters.

As a result, sports betting operators have increasingly drawn upon fintech state-of-the-art innovations, as well as artificial intelligence (AI) to scan for suspicious activity in real-time in an attempt to tackle online fraud with minimal inconvenience to genuine users.

In an ideal world, sportsbooks would opt for a comprehensive, fail-safe system, but implementing too many safeguards could easily jeopardize or alienate customers at the signup stage of the process.

Instead, fintech-led smart verification systems are designed to analyze risk levels on the fly, adding extra steps to the process, but only when necessary. For obvious reasons, regulators demand thorough identity checks in every instance, but new automated KYC tools have cut waiting times to verify an account from a few days to just minutes.

There is also optimism that blockchain technology’s further implementation in sportsbooks’ fiscal dealing will provide a digital paper trail for every bet, deposit, and payout, which would ultimately reinforce the trust demanded of sportsbooks as they grow their player base.

In addition, the rise of digital wallets has given bettors far more flexibility, allowing users to store funds securely and make instant transactions without traditional banking delays.

Fintech’s Fight Against Chargeback Abuse

While genuine bettors might not know what chargeback fraud is, nor know just how big the problem once was, but it became endemic in causing authentic payout delays in the evolution of online sports betting.

At the heart of the chargeback issue were when customers malignly disputed legitimate sportsbook transactions, often claiming they were unauthorized or incorrect, in an attempt to get them to reverse the payment. Sportsbooks would essentially lose out after the chargeback, even though the bettor had already received their winnings.

Chargeback fraud still exists today, but certainly to a lesser extent, as fintech’s advanced biometric-oriented logins and AI-powered monitoring now help online bookies spot repeat offenders, flag suspicious refund requests, and even detect promotions and bonus award abuse.

The implementation of blockchain technology would also make it decisively harder for scammers to cheat the system, as sportsbooks would have a digital record of every transaction made.

With fintech’s intervention, gambling operators can sort real claims from fraudulent ones far quicker. By handling individual cases more efficiently, sportsbooks lose less money, and honest bettors benefit from faster dispute resolutions.

FinTech’s Protection for Vulnerable Gamblers

The ever-increasing concern among problem gambling advocacy groups is the risk posed to those who cannot control their wagering addiction. With endless sports sponsorship deals and advertising campaigns, combined with easy access to online sports bookmaker mobile apps, it can be hard for problem gamblers to escape the clutches of their betting habits.

However, conscious of the bad press the issue continues to generate, global sportsbooks are partnering with fintech firms to offer built-in safeguards, such as self-exclusion tools, spending caps, and automated alerts that can flag notifications of overuse to help keep bettors in check.

By way of an example, global sports betting giants Bet365 and 888sport have integrated tools that allow users to set deposit limits and even self-exclude if needed. Additionally, firms such as BetOnline have dedicated resources aimed at providing responsible gambling advice and wagering limitations to ensure bettors can stay in control.

The Bottom Line

Fintech has undeniably transformed the online sports betting landscape, to the benefit of both the digital bookies and gamblers alike. Offering enhanced security, along with a smoother user experience, the integration of advanced technologies, including AI, biometrics, and blockchain, has allowed the industry to meet the insatiable demands of the burgeoning global sports betting market.

These robust fintech-inspired protocols mean the industry has undeniably accelerated its ability to not only enforce security protocols but do it with minimal impact on the gambling public’s consciousness.

Looking ahead, undoubtedly fintech’s more than successful collaboration with digital sports bookmakers will continue to evolve, with the sector’s sustained innovations poised to reshape the industry even further. That being said, the only possible caveat to this evolving relationship gaining more traction might depend on the need for state-led regulatory bodies and the US Commodity Futures Trading Commission (CFTC) to eliminate the threat of offshore cryptocurrency prediction markets.

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