Credit Card Companies Implement Tough Policies

10 November 2000
Thanks to some new policy changes by both MasterCard and Visa, payment transactions between online casinos and their customers have become more difficult. Most damaging are the changes announced by MasterCard (effective immediately) regarding requirements for acquiring and processing remote gambling transactions.

The changes include a prohibition on the sale of electronic chips or electronic currency by an Internet casino for use at sites other than its own. Further, the bulletin states: "Internet gambling merchants may not pay winnings or refund unspent electronic chips by issuing a credit to a MasterCard card account."

One industry credit card processor called these rules a "major blow" for online gaming operators. "It is very bad for the (online gaming) business as most site operators will tell you that if you pay the customer entirely by check or wire you can be assured that they will chargeback too. Every site that accepts credit cards refunds to the cards - I know of no exceptions. It is the safest thing to do - if the card is stolen, and the user wins, you cut your risk by only returning "excess" funds (those above the original charge) by check," the spokesperson explained. More ominously, she added, "wait till you hear what Visa is doing!" (Further explanation, however, couldn't be supplied until Visa's directive becomes available.)

Charles Crawford, executive vice president for Internet Billing Co. Ltd., hadn't read MasterCard's actual directive yet, but he felt that such a change could have dire consequences: "If MasterCard, indeed, has disallowed credits of transactions it would be unfortunate and, in my opinion, counterproductive to their likely intent. While there is obvious reason for the card associations to disallow the use of their cards for the payments of winnings from wagers because they are 'credit cards' not stored value cards, reversing the original amount purchased of electronic cash -- which is the normal transaction -- is not payment of the net amount won by a wager. Winnings typically are paid to players through other payment modes, not credit cards. If the credit of an original purchase of electronic cash credits is disallowed, unscrupulous players might well receive payment by convention means (checks, wires, etc.) and then charge-back the original amount of the e-cash anyway. Thus, this well could lead to more incidence of chargebacks and, by the way, operators losing double."

In other credit card news, both MasterCard and Visa have implemented new regulations requiring all online transactions to be marked with a "ECI" notation during authorization, to show that the transaction is electronic. Merchants failing to comply face fines up to $25,000.

"I don't see this, in particular, as an issue that directly is aimed at the industry," Crawford commented. "I don't think we, as an industry, are doing much to disguise our transactions as if they were non-Internet." Thus, he felt that the new "ECI" code requirements isn't something that should unduly concern operators.