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US iGaming Almanac: Picks / Shovels to Build a Market

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With the efforts from four research teams, we present a deep dive into the nascent US iGaming market focused on the complex and somewhat oligopolistic payments ecosystem. Our research, underpinned by a proprietary consumer survey and channel checks, reveals significant friction and challenges from a payments perspective.

A Big Opportunity, But Just How Big?

In this report we seek to derive the market size for the US iGaming market. We define the iGaming as online sports betting and online casino. Deriving a market size for the US iGaming market is more an art than a science. This is moreso for quantifying payments opportunity in the space which is predicated on deposit volume as opposed to the Gross Gaming Revenue (GGR) metric quoted in the industry.

We estimate the 2025 deposit volume opportunity to be between $33B-$49B. This figure is predicated on GGR outlook of $16B and employing a 2-3x multiplier to derive deposit volume estimate following industry checks. We see growth in the US market to be several multiples ahead of the 10% CAGR forecast in global iGaming deposit growth.

Online Gamer Survey Results

We surveyed 650 US online gamers related to their funding and payout experiences across online betting platforms. The results show that significant friction exists with respect to bettors’ ability to fund wagers. Roughly 37% of respondents indicated they had a payment credential rejected. 33% responded that rejections make them less likely to attempt future deposits.

The survey revealed significant demand for alternative payment methods (APMs). Digital wallets registered as the preferred method to fund wagers. This was higher than bankcards, generally a rarity in the US. Not surprisingly, an leading electronic payments company was the digital wallet of choice. It was a common refrain from our industry channel checks. However, niche solutions  registered respectable response rates as well.

The top 5 sites account for 80%+ of the total online sports betting market. While not an option on leading platforms ~75% of respondents indicated a willingness to fund deposits with cryptocurrency. All in all, the survey underscores considerable differences in the iGaming payments ecosystem relative to most other online verticals.

Payment Friction in Online Betting Is Real

Our industry channel checks confirmed our overall take from the consumer survey. Payment/funding friction is a challenge and creates significant opportunities for payments providers and data / analytics companies to deliver value to online platforms.

We estimate a whopping combined card (credit and debit) decline rate in excess of 30%. Many of the largest card issuers restrict card use in some fashion. Unlike the general US eCommerce market, we estimate cards in aggregate account for less than 50% of total funding. Digital Wallets are approaching a 30% contribution. ACH/bank account payments account for most of the rest of the volume.

Clearly APMs are a necessity, not a luxury, commensurately elevating the overall cost of payment acceptance. Charge-back rates appear to be approaching 1% – elevated compared to overall eCommerce albeit manageable. This indicates continued opportunities for user authentication and fraud mitigation solutions. Lastly, by and large platforms appear to be employing a multi-vendor approach. They often rely on multiple providers for best of breed services such as gateway and acquiring, payout technology (distributing winnings to bettors) and risk and fraud authentication.

That said, in our view the complexity of the US iGaming market appears to be forming a somewhat oligopolistic payments provider landscape. A handful of providers with domain expertise and / or niche solutions account for outsized market share across select functions/solutions. We believe the barriers to entry in this fast growing vertical are considerably higher than traditional retail, and we expect that to remain the case over the intermediate-term.

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