Risk Appetite and Illusion of the Best Client for Any Fintech
Some iGaming operators often assume that volume and real willingness to pay higher processing fees make their projects the top priority clients for any payment system. Startups in gaming industry often come to us with confidence that they are a goldmine for any payment provider, as their product potentially can bring millions in monthly payments.
But these same startups often face rejections from fintech giants, while smaller PSPs impose strict conditions on limits and reserves, constantly raise MDR, and offer less-than-ideal approval rates. Why does this happen?
To build a functional payment infrastructure, it is essential to understand how decision-making works in fintech and why iGaming remains an undesirable (though often profitable) asset for many payment systems.
Non-Obvious Risks: From Acquirer to Regulator
Worth noting that payment service provider (PSP) is often just an intermediary. Since most payment systems operate as independent businesses, they collaborate with acquiring banks, card schemes (Visa, Mastercard), and are subject to government regulators. Each of these entities defines its own risk appetite — the maximum level of risk an organization is willing to accept based on its license and business strategy.
For large public companies, stability and predictability are more important than the profit from individual merchants, as they allow to be confident in their market stance. When acquirer works with e-commerce segment (such as regular retail or streaming services), it experiences low and predictable levels of refunds and chargebacks. This creates smooth processing and clear cash flows, where nothing causes trouble. Introducing iGaming traffic into this flow instantly changes the risk profile of the entire organization for banks and adds not only risk but also workload. It requires stricter fraud control, an understanding of the merchant’s business nature, regulation, and involvement in resolving all disputed cases. Stripe, for example, reports increasing profits year by year and offers one of the best payment services in the world, yet it does not work with high-risk segments at all or selects only the most regulated industries.
Additionally, if a regulatory audit reveals transactions in favor of unlicensed operators or violations of KYC procedures, the acquirer’s license itself may be at risk. For companies like Adyen, the risk of losing access to payment networks is incomparable to the profits from gambling fees. They choose to scale in low-risk niches, and the absence of iGaming in their portfolio is a deliberate choice in favor of business security, not an oversight. At the moment, Adyen is not only online payment processing but offline as well. They provide POS terminal for biggest international companies. In Malta, well-known country for many iGaming workers, you may see PSPs as acquirers for offline shops not banks. Many payment systems develop into this direction and see greatest perspective to become dominant payment processors for restaurants and gift shops, growing steadily and calmly.
Regulatory Sanctions and Visa-Mastercard Rules
It is important to note that payment systems are under constant pressure from banks and governments, but they often choose not to engage with high-risk businesses on their own. A 7-10% fee cannot cover the risk in the way merchants perceive it. While this MDR is indeed high, especially compared to direct bank acquiring, it ultimately covers operational costs and insures against fraud with some reserves but does not protect the PSP from legal consequences. Earnings are possible, but they could be a one-way ticket out of the payment industry.
European and global regulators (such as the FCA) adhere to a zero-tolerance policy. Processing payments for gambling projects without the appropriate local licenses can be seen as complicity in illegal activities, which is a serious crime, not a simple mistake, and carries fines and criminal risks for the management board.
Additionally, there are the rules of payment systems (Scheme Rules). Visa and Mastercard use monitoring programs to control chargeback levels and transaction patterns. If a PSP allows a client to exceed limits, sanctions can be imposed on the entire volume of processing traffic. The risk of losing Principal Member status or receiving a multimillion-dollar fine makes iGaming projects toxic for payment providers focused on the mass market. As a result, PSPs strictly quota high-risk traffic: they accept only few merchants who will not become a critical mass for their reporting to the regulator.
This creates a precedent where genuinely high-quality solutions are often unavailable to the iGaming, even the legal part of the industry. In response, a segment of high-risk-focused payment systems has emerged. These companies do not attempt to cover e-commerce or become a new PayPal — they have chosen one industry and work exclusively for it, fully investing in risk minimization. In practice, there are both pros and cons, as the individual approach allows them to provide a solution here and now. However, the constant need to cease fires and navigate regulations leaves them no time or spare funds for development, refining approval rates, analytics, or identifying growth areas. These are the thing for resilient products that can invest in every percentage point of approval ratio without constant fear that their license will be revoked or the market will close altogether.
Given these factors, high-risk merchants often need to invest more in their own payment pathways and structures and rely less on payment systems. They change frequently, but your own structure will always remain. This is the opinion that many disagree with, but we never tire of repeating it, as we know it on our own experience.
Operational Costs of Payment Systems
It may seem unfair, but startup that claim of future million-dollar turnover does not automatically become a profitable client right now. For a PSP, servicing one iGaming project costs many times more than supporting hundreds of typical online stores on same platform.
The first factor is the entire complexity of compliance. Underwriting a gambling operator requires a deep analysis across different jurisdictions, monitoring the source of funds (SOF), and detailed verification of UBOs. This poses the need in expensive AML specialists and lawyers who understand the topic and have relevant experience, which subsequently reduces the benefit of high fees (their salary is higher, they might need some additional instruments and resources). Compliance works not only as an entry point but also continuously monitors payments and activities to detect any negative changes. While an online store does not require intense monitoring and any anomaly will be immediately noticeable, an online casino must be monitored constantly, as it is essentially a set of different anomalies. Among these, it is necessary to distinguish normal behavior from atypical.
Additionally, one cannot ignore volatility of traffic and financial instability. iGaming is always in fluctuations of turnover and faces a lot of friendly fraud cases, where users initiate chargebacks after losses, even though they have actually received the service. This requires a quick response and the collection of primary documentation in the shortest possible time.
When evaluating a new project, a PSP always considers the alternative costs it could potentially impose. Instead of concentrating all security department resources on one high-risk client, it is more profitable to connect several dozen stable SaaS platforms. This allows for linear growth without fear of sudden inspections by financial authorities or blocks from acquiring banks. Predictable cash flow is what any fintech company strives for. It allows for earning and confidence in the future. For the iGaming industry, confidence in tomorrow is elusive, and although industry participants have come to terms with this and even joke about it, fintech is not ready to enter this game.
In summary, for payment systems, decision to work or not to work with iGaming is not a matter of personal preference but a calculated choice. Do not expect anyone to be inspired by your business model or new game with desire to support your product, especially in the early stages. But this also can be worked out. When you know it, you have the opportunity to apply this knowledge, not wasting time on emails to Adyen and trying to understand why they are not responding. When launching a business in this industry, you will immediately be aware of its complexities.
To gain access to quality processing, an iGaming project must stop positioning itself solely through volumes and understand the value of transparency and its own compliance. Investments in systems, payment structures, and quality knowledge will help you not to suffer from every market storm but manage the situation. The ability to create a system from available sources and maximize its potential is the main value of a payment expert in iGaming, which you can always find at Monoup.
