According to the latest OPR Quick Takes, a daily E-Mail newsletter sent out by OnlinePokerReport.com’s Chris Grove (sign up for OPR Quick Takes here), PayPal is considering what would be a monumental reversal of their longstanding position on processing online gambling transactions.

In his latest Quick Take, Chris Grove stated, “PAYPAL plans to announce a foray into processing regulated online gambling payments in the coming months, according to a source with knowledge of the company’s plans.”

Grove went on to say that nothing official has been announced, but he also indicated that this isn’t the first we’ve heard of this possibility as, “PayPal has been looking at the issue for months,” according to Grove.

So why is PayPal different than other payment processors already servicing the market? In my estimation there are two reasons: PayPal is already widely used in the US, and the company has a terrific reputation and brand awareness as well.

So while there are several other online payment processors, including Neteller, are already in the market space, PayPal is something altogether different and could help resolve (or at least assist in) the current payment processing woes in states with legalized online gambling like Nevada and New Jersey.

PayPal is widely used in the US

During the height of the Poker Boom, many U.S. online poker players had Neteller accounts; actually, virtaully every single one did.

U.S. players used the payment processing company that handled 80% of the world’s online gambling transactions to shuffle their online dollars back and forth between sites and into their bank accounts.  But following the passage of UIGEA in 2006, Neteller became a target and was shut down by the U.S. Department of Justice in 2007 for processing gambling transactions. The company remained off-limits to U.S. residents from then on, finally returning earlier this year with the return of online gambling.

Essentially, Neteller went from a commonly used online payment processor to an afterthought. For current online poker players to turn to Neteller (which they can in some markets with licensed and regulated online poker) they would have to create a new Neteller account, and these added steps are something many don’t want to go through.

But this is not the case for PayPal, which is already used by millions of Americans to make online purchases and handle other transactions. Virtually every major eCommerce site accepts PayPal. PayPal is even accepted at brick & mortar stores like Toys R’ Us.

So, unlike Neteller in 2014, many Americans already have and use PayPal accounts, and if online gaming sites suddenly started accepting PayPal it would quickly jump to the top of the heap as a deposit option.

Many online gamblers wouldn’t even have to set up a PayPal account, and as has been drilled into our heads by several operators (most notably Ultimate Gaming) for every added step you create you lose 10% of potential customers. As Ultimate Gaming’s Tom Breitling stated, “Each computer click you ask someone to make during the e-commerce process turns away about 10-20% of those customers. Looking at it another way, you lose 1 in 10 customers with every click.”

And this is the main reason PayPal would be a game changer; for most people there are no extra clicks.

Reputation

Neteller and other payment processors now available in the U.S. market, like Skrill (formerly Moneybookers), have another issue they need to overcome as well: Reputation and/or lack of brand awareness.

In 2014, very few U.S. residents have Neteller accounts (the company is now known as Optimal Payments) and there was also a bit of a sour taste left in the mouth of the online poker community of old as Neteller’s shutdown following UIGEA froze millions of dollars of funds, some for close to a year.

So now Neteller (going by the name Optimal Payments) not only has to introduce its new brand into what is essentially a new market, but also has to overcome its past issues.

PayPal is an extremely powerful brand in the U.S. and the sight of PayPal in an online gaming site’s cashier would likely lead to a lot of potential customers saying, “oh good, I can use PayPal to deposit and withdraw.”

Steve Ruddock

About

Steve is a seasoned veteran of the online gambling industry, having written about it from every possible angle in his many years as a freelance gaming writer. Based in Massachusetts, Steve especially focuses on regulatory and legislative news coverage pertaining to the U.S. market.