Winning at payments in South Africa's online gaming and betting industry

The online gaming, casino and sports betting industries in South Africa have been steadily gaining traction over the last several years. Today, these are some of the most popular forms of online entertainment in the country. The online gaming market was projected to reach revenue of US$736.30 million in 2023, with online sports betting estimated to be at US$350.50 million in 2023. The number of users participating is expected to reach 3.6 million by 2028.

According to TGM Research, nearly 50% of South Africans bet on sports in 2022, and 35.5% bet online or through apps. Around 86% of those that participate in sports betting do so at least once per month.

Much growth has happened in particular since 2020, when COVID 19 forced many who had preferred to place bets in person to do so online. Businesses introduced a host of online casino and lottery games in addition to sports betting in response, which have continued to attract and maintain a significant audience.

Unlike industries like e-commerce, where purchases are often less frequent, higher in value and can be attributed to an item that was delivered or not over a period of time, the online gaming industry operates at a different pace and expectation and requires a much heavier support infrastructure to enable 24/7 ‘on’ service.

What makes the online gaming industry unique

There are a few things that make payment operations in the gaming industry unique: the need to enable many small-scale transactions quickly and without friction, the need to combat high rates of fraud and the need to maintain constant support and uptime.

In online gaming in particular, customer cadence is cyclical. Gaming platforms are expected to be on and functioning 24/7, with support available instantly in the event something goes wrong. Any downtime on the platform, or when it comes to enabling customers to make a deposit or place a bit, can be detrimental and costly.

The volume of users transacting on and interacting with gaming platforms is often massive - and those users have plenty of choices on where to place their bets or play games in what has become a highly saturated market. As a result, users can be less sticky and may switch between platforms if they encounter a negative experience.

It’s therefore important that gaming platforms remain agile and able to act quickly, while also keeping their tech, offering and user experience up to date amongst competitors. This requires significant investment in support teams and in B2C marketing to keep attracting and retaining users.

On the backend, it’s vital that accounting teams can easily reconcile transactions and correctly allocate funds to the right account. This is particularly critical given the sheer volume of often low-value payments coming in, which players are looking to use immediately, as well as requests for withdrawals. 

The role of a strong payments partner in the gaming industry

For gaming and betting platforms in particular, payments partners have a significant role to play. The ability for a customer to easily, seamlessly and quickly make a deposit into their account and place their bets or start playing is critical - and instant value allocation is a huge need. The payments process should not pose a barrier or stand in the way of play. Gaming businesses need payment partners that have created solutions tailored to their needs, including payment options that can handle impromptu and high-volume, small-scale transactions.

That’s why innovative offerings like one-click payments can have a significant impact on customer experience and retention. One-click Pay by bank solutions like the one offered by Stitch enable returning users to pay more quickly without the need to log into their bank accounts every time they make a deposit. This is an industry first for Pay by bank and has significantly reduced the average deposit time. 

From a trust perspective, it’s important that customers know they can easily and safely make a deposit when they need to, with a variety of payment options. They also need to know that they can safely withdraw their funds upon request, with limited hoops to jump through and fast allocation of funds.

Ensuring your payments partner operates with highest level security and data practices, while actively finding new ways to detect and combat fraud, is especially critical in this industry.

Operational challenges in the online gaming payments space

Businesses operating in this space need to offer as many popular local payment methods as possible, with built-in redundancy in the event something goes wrong or a particular provider is down. Preferred options include digital payment methods such as Pay by bank, card and manual transfer, as well as offline methods such as vouchers and cash at ATM.

Uptime on popular methods and redundancy is critical, both to offer the best possible experience to users as well as to achieve the best commercials for the business, given margins are often small.

The result is a world where these businesses need to support and manage upwards of 10-15 different payment methods. Operationally, integrating and maintaining these methods takes a lot of time and resources, both on the admin side and the engineering side. So the teams need to strike a balance between remaining at the forefront for customer experience and ensuring proper support for additional offerings.

Onboarding and management of new payment methods then becomes exponentially harder each time, often involving teams across the business - from customer support to answer queries, to marketing to promote the new methods to users, to recon and finance teams who need to understand how to pull reports from each new provider.

As a result, these businesses often employ very large finance teams that need to run recon on a daily basis.

How the right payments partner can improve finance operations + retain customers

The right payments partner can make a significant impact for businesses that operate in this space by understanding the importance of a fast, seamless and secure payments experience with multiple options, helping businesses stay up to date with the latest offerings and enabling streamlined orchestration, reconciliation and reporting.

At Stitch, we work with some of South Africa’s largest online gaming and sports betting businesses to help them better manage diverse payments needs. We go into each relationship with a deep understanding of their businesses and co-develop custom solutions to enable their teams to optimise performance and further reduce friction at the point of payment. We’ve also adjusted our support approach to ensure consistent and fast responses in the event of any issues and become a knowledge partner to help these businesses reduce and prevent fraud. Today we continue to launch additional products with them based on their business needs.

Businesses in this space can leverage our robust payments orchestration and reconciliation platform, PayOS, to better track, manage and optimise payments performance and finance operations in order to remain a step ahead of the competition.