Casino Payment Systems – How They Differ From Traditional Payment Systems

Unlike the traditional merchant transaction processing environment, the delivery of cash access services, and the products through which they are delivered, need to meet extremely high standards of reliability and efficiency in order to handle the high transaction volume of the casino gaming industry.

Gaming Industry:

The overall US gaming industry operates in over 40 States and generates an estimated $ 90 billion in revenue (Data: American Gaming Association). Cash access services are present in numerous venues, which include the traditional casinos of Las Vegas and Atlantic City, Native American Casinos, Riverboat Casinos, Pari-mutuel Race Tracks, and Card Rooms.

Cash access products play a mission critical role for gaming operators with an estimated 70% of gaming revenue being derived from such services. Most gaming operators rely on outsourced third party companies like Sightline Payments LLC to provide these services to their patrons. We estimate the North American (on an annual basis) Gaming Cash Access market to be $ 25 billion dispensed to patrons and over 100 million transaction approvals, generating an estimated $ 950 million in revenue for the industry.

The largest provider of these cash access services includes Sightline Payments (PRIVATE: Sightline), Global Cash Access, Inc. (NYSE: GCA), Global Payments Inc. (NYSE: GPN) with an approximate combined 90% market share. The remaining 10% is divided amongst other providers including Money Centers of America (MCAM.PK), DiTronics Financial Services, and ASAI.

Here is a description of the common types of Cash Access Services found in a casino:

• Credit Card Cash Advances (Smart Station Advances): Credit card cash advances enable a gaming patron to access funds up to a specified limit set by the card-issuing bank. The consumer fees average about 6% of the amount requested.

• Debit Card Cash Advances: POS debit card transactions are processed much like a regular merchant transaction, whereby a patron is able to access funds up to the cardholder's purchase debit limit, which is usually higher than the daily ATM limit. The consumer fees average about 3.5% of the amount requested.

• ATM and ATM3X: A patron can withdraw funds directly from his or her checking or savings account subject to a daily limit average of $ 300. The consumer fees average about $ 4.00 per transaction requested. A recent phenomenon throughout the industry is the migration of ATM services onto Glory, NRT, and Western Money Ticket Redemption and Bill Breaking Devices.

• Check Cashing (Certegy and Global Payments): Check verification, processing and guarantee services, enables the cashing of patron checks at the casino cashier. Generally there are no fees to the consumer, but, in certain geographic regions the fees can be upwards of 6% of the amount requested.

• Markers and Gaming Credit: Casino establishments subscribe to credit bureau services to obtain detailed credit information for the purpose extending markers or credit to patrons. Generally these services are reserved for a casino's "high end" players and there are no fees to the consumer.

The principal costs and expenses of Cash Access Services include:

• Casino Commissions: For cash advance, ATM and check cashing transactions, service providers pay a commission to the gaming establishment at which the transaction occurred.

• Interchange and Processing: Service providers pay credit card associations like Visa and MasterCard interchange fees for services they provide in settling transactions routed through their networks. In addition, fees are paid to participate in various ATM and credit card networks. The amounts of these interchange fees are fixed by the card associations and networks and vary base on the network and the amount requested. Connectivity and processing fees are paid to those companies that provide the service providers with network services.

• Check Cashing Warranty: Check cashing warranties relate to the costs incurred in connection with dishonored checks that are warranted.

• Operating Expenses: Operating expenses consist primarily of salaries and benefits, armored carrier expenses, the cost of repair and maintenance on the cash access devices.

• Interest Expense: Interest expenses in connection with the procurement of currency to fund the operating requirements of the ATMs.

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Source by Kirk Sanford