This episode was recorded at the Money 20/20 event in 2019. On this episode, PaymentsJournal’s editor-in-chief, Ryan McEndarfer, sat down with Christopher Justice, president of Global Payments, to talk about payments in the gaming industry.
PaymentsJournal:
Christopher, thank you so much for joining me on today’s episode. For our first question here, Global Payments is a large multi-billion dollar brand. Can you tell me more about the gaming division’s role within the industry?
Christopher Justice:
Oh, absolutely. Thanks, Ryan. Global Payments is a $50 billion company operating in well over 100 countries with over 30,000 employees, and it’s very much focused on a vertically targeted tech-led payment strategy. The gaming division really started the core of that strategy. It’s one of the oldest divisions in the company, and has been solidly focused on the gaming industry for the last 20 years. The business itself is licensed in more than 140 jurisdictions across the country and is highly targeted, highly specific to deliver the hardware, software, and services required by the gaming industry. We support over 500 of the world’s entertainment leaders and more than 90% of all of the interactive gaming and news sports betting locations that have popped up. One thing that’s really unique about Global Payments’ investment in gaming is we’re the only processor that has a direct investment in the gaming space. We don’t utilize third parties in the delivery of any part of our service. Being 100% dedicated to the industry means that from our call center, to our innovation teams, to product delivery, to service technicians, to field service, etc., when you’re talking to somebody in this division, the only thing they deal with is gaming. Whether it’s the customer, the Ultimate Casino guest, or the casino itself, it’s people that know the business. They understand the rules, the regulations, and all of the various things that come into play in a very complex industry. Through that we’re able to then deliver, as I mentioned, the hardware, the software, and the systems, things to support a complete resort experience. So, it’s not just the casino floor; it’s the restaurant, retail, online, and entertainment venues that are throughout the property.
PaymentsJournal:
Oh, excellent. Thank you for that. I think it’s very interesting, and I also think it’s very smart on your company’s behalf to essentially own the whole part of it there. Because the payments industry itself has its own rules and regulations that it has to abide by, but then the gaming industry also has its own regulations and rules that it has to comply to. Having them both together, you need somebody who has that specialization skill that’s solely looking at that particular industry vertical because between the two of them, I imagine there are a lot of hoops that you have to jump through to make sure you comply with essentially serving two masters here. On that end, would you say that’s an accurate description in terms of just an overwhelming amount of regulation and compliance that has to be met because of the two different industries that you’re playing in? Or is it kind of a “no, things might be a little bit easier.”?
Justice:
It’s probably more complex than even how you’re categorizing it. Because while certain things like the Department of Justice will regulate things like the Wire Act, it is a state-led or jurisdiction-led initiative when it comes to gaming. So you’ve got, for example, the state of Nevada that obviously governs gaming regulations here. But then when you get to Oklahoma, each of the individual tribal jurisdictions makes up their own rules. We’re licensed in more than 140 jurisdictions, so we not only have to comply with PCI, GDPR, Visa, and MasterCard rules and regulations, but we’ve got to deal with regulations in Nevada, which are going to be different than regulations for a particular tribe in California or Michigan. And now with sports betting new rules and regulations are coming out for Tennessee and Colorado. So online gaming has its own set of rules and regulations typically, certainly as we get into the interactive lottery space there’s, again, another set of rules. As we’re implementing solutions, we’ve got to be very well-aware and configurable, where certain things are allowed in one jurisdiction, but not allowed in another. Our systems are all configured to operate and work effectively in all of those environments, so that we can deliver up to the extent of what the regulations will allow us to deliver in that particular market. So yeah, it’s a lot of complexity. We have full teams of people, who all day every day really work exclusively on licensing, compliance, and all of these regulatory issues to make sure that everything we do is 100% compliant in the industry.
PaymentsJournal:
Yeah, I certainly think that’s very interesting and it almost kind of sounds like payment gymnastics in the sense that we’ve got to jump through all these hoops to make sure everything is kosher on all ends here so there’s no issues. Moving on to the next question here. Gambling is a hot topic in the payments space right now, from sports betting, to i-gaming, to mobile payments. I’m curious to get your take on what you see as the biggest trends heading into the year 2020.
Justice:
You know, I think there’s a there’s a couple of hot topics that are hitting the market and I think as we look at it, who doesn’t enjoy the convenience of a modern commerce experience? Whether that’s the popular apps that we’re using, like Uber, Airbnb, to really neat websites like Amazon or Apple, or even things that are happening in the brick and mortar world like pay at the pump. Who doesn’t want to be able to just drive up, fill your car, and drive off? So payments modernization is a really hot topic in the space right now. That primarily comes from the fact that the U.S. Supreme Court repealed PASPA, the professional and amateur sports betting prohibition, which is enabling sports betting to pop up around the country. Well, it’s really hard to have a mobile sports betting philosophy in a particular state if the rules and regulations that were already created in the state don’t allow you to fund the mobile application.
So payments modernization is now really becoming a very hot topic. It’s not only making sure that we have the ability to fund the new solutions states are wanting to deploy, but likewise we want to make sure – and the regulators, operators, and everybody in the industry want to make sure – that we are delivering the kind of experience that’s going to meet or exceed guests’ expectations once they get there. So certainly that’s a very hot item there. That also moves into conversations in and around cashless gaming, which is a hot topic that we ought to dive deeper into. Just like today, in anywhere outside of the gaming world, I love going to amazon.com and placing my order and, at least where I live and depending on what I order, an Uber driver will actually deliver it to my door within a couple of hours. Everybody wants that kind of modern convenience and it hasn’t previously been allowed in gaming. So cashless is a hot Item. But going back to your previous comment, regulatory and compliance are the things that are top of mind. So we as an industry live by a culture of compliance philosophy. Whether it’s all of the payments stuff, like PCI and GDPR, or FinCEN rules and regulations, or gaming rules and regulations, it’s really a hot topic to make sure everything that’s happening follows a very tight line to meet all of the requirements in our space.
PaymentsJournal:
I’m really glad that you brought up the whole cashless gaming part there and it does strike me as very interesting. Particularly as you look around Las Vegas and just in other industries you go, you see where the payments industry as a whole is kind of starting to go in the direction of payments modernization and cashless being part of that. Seeing how that may translate into the gaming industry, from your perspective, where does the industry stand now in terms of cashless adoption?
Justice:
You know, it’s really at the forefront. Gaming has really been stuck in the past when it comes to payments. The player experience truly hasn’t changed in decades, while every other industry has made monumental advancements. I think the difficulty when you think about this from a payments perspective is that the payments industry as a whole really lacks the understanding of the regulatory complexity, and certainly doesn’t understand the infrastructure requirements in a very complex gaming space. So many people, as well, hear “mobile” and they assume everything should work like Apple Pay. “I’m going to load money into a wallet; I’m going to load the money from that wallet directly into a slot machine”, which opens up a myriad of regulatory landmines that are going to blow up in our face, if you will. The other part of it is that while you’re able to use your credit and debit cards everywhere else you go in the world, that’s not the case in gaming. While Visa and Mastercard have opened up the rules and regulations to allow gaming transactions in the U.S., financial institutions still don’t want to support the wager of the player. So in the interactive space, we see more than 50% declines, even though a guest may have the credit limit or funds in their account to actually participate. It’s just that the financial institution doesn’t want to allow that to occur. So thinking about that, if you wanted to roll out a mobile solution into the gaming space, and you’re basing it off of the payments mentality of loading a wallet with a credit or debit card, you’ve got regulatory problems. These problems are going to create massive cost components to outfit things to cover up the regulatory components. And then you’ve got a solution that’s in no way going to meet the guests’ expectations of a seamless experience, when half the transactions are going to get declined. There are just a significant amount of challenges there. The good thing about it, though, is our focus in the gaming space has allowed us to really drive some significant innovation into the space. We’re launching a solution called VIP Mobility that fits into the gaming environment. It meets the regulatory requirements. It’s got the solid funding solutions that enable an incredible guest experience so that just as reliably as Apple Pay is going to work everywhere else, VIP Mobility works in the gaming space and allows a player to participate within their favorite games. Whether it’s the slot or the table, or they want to go to their sports betting account, or they want to go to their interactive gaming account, or they want to take their winnings, go to the restaurant ,and buy dinner, or go to the gift shop, or buy tickets to Cirque du Soleil, or whatever it may be. We’re really excited about the future of mobile and feel that we have a very unique advantage in terms of how we’re approaching it.
PaymentsJournal:
Yeah and if we could, I want to dive a little bit deeper into some of the challenges that you were talking about there at adopting cashless gaming; you had brought up the regulatory complexity there. You also brought up a really good point in that the end consumer, when we have a mobile application, doesn’t necessarily understand or care about the regulatory aspect. They just look and say, “is this a great experience or not? If it’s not, well, I’m not going to use it again. And if it is, well, I’ll continue to use it.” But there’s a lot of things that are going on in the back end that the consumer themselves might not be aware of in terms of why that particular thing might not work. Some of it might not be due to just the application itself. Sometimes it has to do with things that are further down the chain that unfortunately, the application just doesn’t have any control over. You were talking about the instance with a financial institution not releasing funds for whatever reason that they have in their regulations there. If we could, let’s go a little bit deeper into some of the challenges of adopting cashless gaming and also, what are some of the operator struggles that you’re seeing in the industry today?
Justice:
So I think that’s a great question. Firefighters tend to solve their problems with a hose and a ladder and the gaming industry is really trying to solve its problems in a similar fashion. Whether that’s the slot manufacturers who, without understanding global commerce and how to actually deliver payment type solutions, try to deliver their solutions, for example, through a highly regulated device that takes more than three years to get through the regulatory compliance process to be able to drop that into the gaming floor. Then when you think about the speed of innovation and consumer products, where there is a new Apple, Android product coming along every six months, it’s very difficult for people that have been in the gaming industry to figure out how they shoehorn these external solutions into the market. That’s where I think Global Payments has had a competitive advantage here in that we have more than 1000 combined years of gaming experience right within our four walls. Couple that with the fact that we have tens of thousands of years of payments experience at a global commerce perspective on how we would deliver these solutions to the market. As I look at the challenges that are in the space to be able to roll out a cashless solution, I think it really falls into three buckets: it has to fit, it has to deliver results, and it has to be ridiculously simple. To dive into those three just a little bit, when I’m talking about it has to fit, we’ve already talked about the regulatory complexity of hundreds of jurisdictions. But then you have the IT infrastructure. There are dozens of back office software applications that drive the casino, all of which are regulated. You have a hardware and infrastructure investment in the front of the house, the connectivity of the slot machines, which is certainly very complex. And while, of course, the latest and greatest game is going to come with the latest and greatest of capabilities, the challenge that most operators have is more than 20% of their floor is still dedicated to the older games that our parents used to play because those are the ones that are still making money. Especially when you get into the high limit room, you’re going to find a lot of older games that manufacturers are not going to want to upgrade to the latest greatest of everything because they’re just not there. Then you start coupling that as well with responsible gaming, which is really the hallmark of what regulators are looking for: how do I make sure that what we’re delivering is safe, controlled, and effective, all the while making sure that game integrity is a key component. So fitting is a very complex topic on its own. Then when you get into the delivering results, whether it’s the hardware investment, the software investment, transaction fees, etc., is the operator going to be able to provide a better experience for the guests to where they’re going to come back more often and to where they’re going to perhaps spend more money. Ultimately, they want to gain that additional loyalty from the player, then is that going to then offset a variety of other expenses? The difficulty with most of the solutions that have been introduced to the market is it’s millions and millions of dollars for somebody to upgrade their gaming environment to even test out whether the solution is going to work or not. There aren’t a lot of real world examples that are delivering a return on investment that would make a casino executive want to take a bet on millions of dollars and expenses just to give it a try. The third key challenge that has to be overcome is it has to be ridiculously simple – and that’s ridiculously simple for the guests to use. It has to be like Amazon, where you understand what the buttons do. You have to have an easy ability to get in, an easy ability to participate, and an easy ability to get out. Coupled with that, it has to be ridiculously simple for the operator to deploy and support. The staff on the gaming floor has to be able to answer the questions for the guests. They have to be able to effectively handle problems and disputes. They have to be able to do their day job with a minimal amount of interruption from a new technology. And I think the combination of those three things are what have slowed so many of the attempts to get into cashless. It really slowed them down pretty significantly. We think we have some solutions that are overcoming all of those and are really going to be able to deliver that effective value that fits into the environment, delivers the results, and is ridiculously simple for both the operator and the guest.
PaymentsJournal:
I certainly agree with all the points that you made there. I really do think it’s all those combined factors as to why you really haven’t seen what a consumer would expect in the technical world in terms of the new innovation or the rapid pace of innovation trickling its way there. A lot of that, as we talked about earlier, you know, has to do with the fact that you’re serving two masters here. There’s the payments industry, there’s its compliance of regulation, then there’s the gaming industry. Then there’s all the things you just highlighted in terms of all of the requirements that this product has to meet to be able to make it into the marketplace there. With that being said, for our last question here, do you have anything else that you’d like to add before we close out today’s episode?
Justice:
So the gaming industry is a unique industry, right? We’ve talked about the complexity and some of the various elements and it’s really not about payment services, if you will. It’s around the development and delivery of a comprehensive ecosystem that’s going to deliver an incredible guest experience while returning positive P&L results to the Operator and then guaranteeing compliance game integrity and responsible gameplay for the regulator. So if you will, it’s aligning the interests of the three key stakeholders in the industry. From a payments perspective, t’s everybody would expect “Oh, well, of course, I want to go deliver my payment services.” But let’s face it, that’s table stakes. As a guest going to the casino, I fully expect I’m going to have an ability to get money. The real question is, how do I get that money? How am I allowed to participate? How do I get to receive an environment that exceeds my expectations for how I want to spend money in in a safe and secure way, while allowing me to maximize my entertainment value? I think those are a lot of parts that folks in the payments industry tend to quickly forget. You know, I think the other parts that we were talking about a little bit, the regulatory complexity, is truly significant in the space. It’s understanding the rules and regulations across hundreds of jurisdictions to make sure we’re doing things correctly, but also securing the licensing that is required across those jurisdictions. Gaming’s not about being an angel as much as being suitable. It’s making sure that folks have fully disclosed indiscretions in their past. In this space, licensing and regulatory and suitability are key. You get booted out of one jurisdiction, you get booted out of all of them. The cost of maintaining all of the licensing and going through all of that stuff can certainly be very challenging. It is a tough environment, but those tough environments certainly create opportunities to deploy innovative solutions. That’s one of the things that we think that we’ve had as an advantage in Global Payments, that ability to see both sides, whether that’s the gaming rules and regulations or the payment rules and regulations, and the ability to plot a path. We’ve also done it in a way where we’re not doing it alone. We’ve created an open infrastructure and a program that allows other gaming leaders to actively participate and deploy solutions that have a modern commerce experience, and also get through the regulatory processes and deliver in a much more expeditious fashion. It’s really been an exciting time and we have had a fantastic year. Certainly, we’re looking forward to the future just can’t see it being any more bright and we think the gaming industry is a fantastic place to be.
PaymentsJournal:
Excellent. Well, thank you very much, Christopher, for taking the time today to speak to me about the payment challenges and solutions in the gaming industry. I hope to have you back on the podcast real soon.
Justice: Perfect, Ryan. Hey, thanks so much. I really appreciate your time today.
