What iGaming needs from open banking
Since its launch in the UK in 2017, open banking has transformed the world of finance, and now it’s perfectly poised to shake up the iGaming industry. Driven by the EU’s Payment Services Directive 2 (PSD2), open banking enables secure access to customer financial data held by banks through open application programming interfaces (APIs) to authorised Third Party Providers (TTP), like Yaspa. It comprises both AIS (account information service) and PIS (payment initiation service) features. Open banking payment initiation services facilitate real-time account-to-account payments, from one bank account to another, typically processed through the payer’s mobile banking app.
For industries such as iGaming, this isn’t just about payments. It is about the potential for more efficient identity checks, better compliance, and, crucially, safer gambling. In the future, open banking might just change the industry’s measures of success, but, before we get there, it needs to overcome a few challenges.
The promise of open banking in iGaming
The world of iGaming is known for its fast pace - whether it’s the time taken to swiftly take a player from setting up their account to placing a bet, or the rapid release of new games and ways to play, one thing is for sure; speed is important. It’s for this reason that the adoption of open banking payments is thriving in the sector.
Firstly, open banking's ability to monitor funds as they move from a person's bank account to an operator's allows it to instantly determine the success of a deposit or withdrawal, regardless of the time it takes a bank to process the payment. Players aren’t subject to pending payments and can place a bet without delay—a core requirement for sports betting, particularly in countries where instant payments aren’t a given. These real-time payment outcomes are essential to ensuring that customers can place bets and wagers before the event starts or even during.
Secondly, operators can use open banking to facilitate instant Know Your Customer (KYC) checks, allowing them to verify crucial identity details retrieved securely using biometrics directly from a player's bank account in real time. It also provides the ability to verify the source of funds in a player's account, helping prevent fraudulent activity such as account takeovers. This duo of possibilities will enable operators to benefit from payments that are faster, safer, and more secure, as well as reduce the friction involved in onboarding new players and bettors.
So, the benefits of open banking for iGaming include enhanced player verification, as well as the speed and safety of transactions. When combined, these factors can enhance conversion rates, minimise onboarding friction, and enhance payment security for both the player and the provider thanks to biometric account authentication. Unlike credit or debit card payments, which often come with higher transaction costs, open banking tends to be more cost-effective thanks to fewer intermediaries in the payment process: it’s a win-win.
Innovations on the horizon
In Europe, the absence of a regulatory framework, such as we have in the UK, is the reason the EU Commission has mandated the Instant Payments Regulation for member states to be enforced by 9 January 2025. This is good news for iGaming, especially in markets where real-time payments represent a core requirement. It’s not just about offering payments but offering payments in a way that makes sense for a digital, fast-paced betting environment.
The shift in Europe will also open up options for operators to look at a broader scope for both payments and KYC checks. By bringing in standard address, date of birth and other verifiable markers of identity, as we hope will be the case with PSD3, open banking could allow operators to do age checks in real-time against iGaming laws across jurisdictions. This could remove the need for players to upload further ID documents, speeding up onboarding times and improving accuracy.
The safer gambling imperative
Safer gambling is an increasingly relevant issue, and open banking has the potential to make a useful contribution here too. Linking bank-level transaction data, including financial and behavioural markers, with gaming activity will enable operators and regulators to gain a more complete picture of a customer’s financial activity across multiple operators. For instance, many problem gamblers have multiple accounts across different betting operators, and no single operator has a clear view across the multiple accounts as to when and where they are spending.
The iGaming industry has had the concept of a 'single customer view' for some time, a system whereby regulators could see a customer’s overall gambling spend with all operators. But to date, initiatives have been focused on data sharing between operators. For this to be effective, there needs to be a quorum of operators who share data, and issues such as GDPR and data quality are a concern.
Open banking delivers a single customer view by different means in a very elegant fashion, by getting the view of data from the customer account. This insight would enable operators to see a player's full financial picture and identify those who display gambling behaviours that point to potential problems or even exploitative or fraudulent activity, like bonus abuse, and intervene before the problem arises. Behavioural traits evident in a player’s transaction history, such as source-of-funds, disposable income and high-risk expenses, provide a more holistic view of players’ financial health. It could enable better affordability checks, too; if operators have a full view of a customer’s spending, they will be able to tell if it is sustainable.
Read more about why Yaspa has won a UK government grant to develop an innovative safer gambling solution based on open banking.
Addressing the challenges
That said, there are hurdles to open banking realising its potential in iGaming. Standardisation is one example. Open banking operates based on shared standards, but banks implement this in different ways, which can pose a challenge, especially when trying to access particular customer data, such as age and address verification, which isn’t uniformly supported across banks. Banks need to collaborate to ensure that they all adopt the same standards to maximise the benefits of open banking in highly regulated markets such as iGaming.
The other challenge is the education of the industry itself. While we’re making progress, iGaming has historically been a paper-based, highly manual industry. So the move from scanned IDs and manually checked documents to a fully automated, digital-first approach will require not just investment but also a cultural shift. The upside: less fraud, less bonus abuse, and more responsible gambling.
What’s next for open banking in iGaming?
So, in summary, open banking will enable iGaming operators to upgrade their payment and compliance infrastructures at the same time, meaning better player protection, higher conversion, and cost savings. What are the most exciting developments for safer gambling? The use of real-time data: with open banking, operators and regulators could get comprehensive, and up-to-date, indicators as to a customer’s gambling across platforms that would enable them to truly know-their-customer, and deliver propositions, and protections, to really meet their needs.
The potential is huge. As the big banks adopt standards and enhance their offerings, operators will have a wider range of tools to assist them in providing responsible, efficient, and compliant gaming. Yaspa is excited to be part of this evolution, working with regulators to help guarantee that open banking supports the current and future needs of operators while providing gaming companies with solutions to deliver a safer, better, and more transparent gambling experience to players, delivering responsible play for the vast majority, while helping protect those at risk.
To learn more about Yaspa’s Safer Gambling solution, please drop us a line.
