Cryptocurrency's meteoric rise has been extensively documented. On recent years, we've seen a growing effect of digital currencies on the gambling industry. Bad Hombre Gaming, a boutique platform provider that specialises in crypto casino, is one such startup pushing the rise of crypto betting.
Hugh Casey, Chief Product Officer, commented on the popularity of cryptocurrency and the reasons why this form of payment is a'must have' for casino operators in 2023.
“I started working in the gaming industry straight after college in 2008. I started out as a Customer Service Agent at Paddy Power – so I was answering the phones there for a year. Then I got the opportunity to go work as part of their gaming team, which was much more operations-focused.
“Over the course of nine years, I worked across various different gaming businesses that made up the Paddy Power brand in a range of operations and product management roles.
“I took the opportunity to join another company in Dublin which happened to be outside of the gaming industry. At that point, I wanted to try my hand at something a bit different.
“I happened to get a call from one of the investors at Bad Hombre Gaming that was looking to set up this company. He asked if I wanted to join and help them create this product. That was around four years ago now.”
According to Casey, Bad Hombre Gaming began as a B2C brand, with a major focus on growing markets in South America. However, the team of industry veterans began to identify some of the significant technology difficulties that betting and gaming organisations were confronted with. Bring on the B2B transition.
“Our technology team was based in Sofia, which is where the majority of our team is based today,” he said. “We started to build up our own platform, but as we were researching everything, we started becoming more interested in crypto and the role this could play in the gambling industry. With this becoming increasingly common, we put a crypto slant on our platform.
“We began to realise that as we were telling people about our platform, there were plenty of people within the gambling industry who were looking for a technology solution that was similar to what we were offering.
“At that point, it became clear that it would be much better to take the technology that we’ve been building and offer it to the market. We’ve been doing that since September last year, and have been firing on all four cylinders ever since.”
Much like Casey, several of the Bad Hombre Gaming team members came to the company after years of experience in the igaming field, many of whom have a depth of expertise of the B2C sector.
As a result, Bad Hombre Gaming has developed a thorough awareness of some of the challenges that gambling businesses encounter on a regular basis.
He added: “I think that ultimately, if you’re able to understand that, everything else will fall into place. It means that you will be able to create a great end product that will drive behaviours from your customers – and most importantly, meet what it is they want.”
When it comes to determining what gaming operators desire, one of the most significant trends Bad Hombre Gaming has observed from its partners is a demand for crypto-based solutions and platforms.
The emergence of cryptocurrencies has been difficult to dismiss. With bitcoin and ethereum generating headlines in recent years, it's simple to see why gambling businesses want to get involved.
“There are a whole load of differences between fiat and crypto when it comes to payments. Crypto, on the one hand, tends to be much cheaper,” Casey said.
“For gambling companies, it’s become more and more difficult to accept traditional fiat payment methods as banks have become more restrictive about accepting betting-related transactions. It’s becoming increasingly difficult. Crypto seems to alleviate this problem.
“Operationally speaking, crypto is also much easier. You don’t have to worry about chargebacks or fraud where people have deliberately tried to recover money that they’ve already spent.”
From the standpoint of an operator, the CPO explained that employing cryptocurrency eliminates the need to worry about bank acceptance rates.
He added: “In my experience with fiat, what can often happen is that you’d accept card payments, and then overnight, multiple card payments would fail as the bank hasn’t accepted the transaction. But with crypto, this isn’t an issue.
“The biggest difference between fiat and crypto operators is that for fiat, you need entire teams to operate your payments operation. But for crypto, you only really need a handful of people because it’s much more simple.
“Logistically, this is much more beneficial for gambling companies too. It’s not even just about the percentage rate that you are charged by the PSP, it’s the entire cost of supporting individual payments is much simpler. Another thing is that payments are also settled instantly too.
“This means that you don’t come up against the cash flow issues that traditional fiat operators face.”
Casey noted that one of the major challenges that gaming enterprises confront is payment acceptance by banking institutions. Many banks may be hesitant to cooperate with operators because they believe gambling transactions are "high risk." However, the use of cryptocurrencies may provide an alternative way.
“Every day, I go on LinkedIn and you see posts of people saying that they have a gambling business but the bank has shut them off. In the majority of cases, they are very well-established companies. They are not necessarily accepting player deposits, they are just companies that operate within the gambling industry,” he said.
“I think it’s becoming increasingly difficult, particularly when starting up. I think that what we’re seeing is a lot of these companies are now starting to accept payments in crypto out of sheer necessity. That flexibility of crypto payments is very helpful, especially for gaming companies at that start-up stage.
“Sometimes it can feel like in the early stages of creating a casino start-up, if you don’t have the high volumes of players and you’re coming from a standing start, no banks want to really discuss payments. So accepting crypto can really help get your business off the ground.”
But, for those who have used 'conventional' fiat currency, what are the fundamental differences in terms of the players? The differences, according to the CPO, are numerous.
The first is the technological aptitude of many crypto players, as well as the sense of community fostered by digital currency, he noted.
With this technological savvy, however, comes an increasing requirement for game creators to provide best-in-class titles to suit the demands of these players.
He said: “Fiat and crypto player bases are very different. But the proposition that the casino builds out is also very different. From a player base perspective, I think that crypto players tend to be much more technologically savvy since the barrier to entry in the crypto market is much higher. People need to really understand crypto to be able to deposit and withdraw.
“These types of players tend to know their game content very well, they’ll understand the difference between different suppliers and how the different mechanisms behind casinos work. With this in mind, your product is incredibly important. Ultimately, they’re looking for a good experience.”
The second significant distinction, according to Casey, is the brand loyalty connected with cryptocurrency bettors. He disclosed that, despite the significantly greater barrier to entry for the crypto business than for fiat currencies, once a person is involved, they tend to be far "stickier." This could be due to the fact that there are so few gambling sites that take digital currencies.
He also mentioned that cryptocurrency bettors are slightly more 'tribal' and community-focused.
He said: “If you think about the crypto community, it’s much more social and much more part of their identity. It’s a similar thing for how they approach casinos. They buy into the casino, support the brand, they choose a casino operator and really display a strong sense of brand loyalty.
“I think that another big thing for crypto brands is building trust with players. For crypto, there has sometimes been this negative perception that you’re going to face some kind of fraud. But this isn’t necessarily the case – it’s important that casinos are giving customers a reason to believe in who you are, and demonstrate that they can trust you.
“A lot of the features that we build into our platform is showing players that we’re legitimately paying wins, that there’s a big community of players that are gambling on our site and that they trust us.”
At Bad Hombre Gaming, much emphasis has been made on ensuring that its partners can best meet the demands of cryptocurrency bettors. This includes developing new capabilities as well as optimising existing operations, the first of which is the ability to store various currencies in a single digital wallet.
"We've developed a few different things for our partners," Casey continued. The first is that we allow gamers to hold numerous currencies at the same time. Consider how players engage with a casino: they register and can gamble in a single currency, whether it is the US dollar, euros, or pounds.
"However, cryptocurrency is not tied to a single currency. As a result, players can store numerous currencies in their wallets, and the number of currencies available is constantly expanding. I believe it is critical that players be able to deposit and withdraw in numerous currencies. It all comes down to that crucial factor of trust and credibility."
The deposit and withdrawal experience is critical in any payment procedure, and this is no different when it comes to digital currencies.
The type of cryptocurrency used impacts the number of confirmations required before a transaction can be accepted.
“At Bad Hombre Gaming, we’ve got a service plugged in which allows for zero confirmation deposits – meaning that a player can deposit funds much quicker. Bettors aren’t then left sitting nervously for that deposit to be accepted.
“Not only is this good from a player experience perspective but also from a trust perspective. It enables our partners to show players that they can deposit their funds quickly, and that they’re not just waiting for their money to appear days later.”
There is a full-time security crew on the withdrawal side to ensure that everything runs smoothly and that checks are performed. These checks are analogous to anti-money laundering (AML) and know your customer (KYC) methods that are currently in use in the fiat arena.
According to Casey, the team closely monitors players' previous betting habits. This not only allows gamers to make rapid withdrawals, but it also aids in the detection of any unusual activities that may be linked to fraudulent behaviour.
“We’re also making sure we’ve got the fraud tools in place to make sure everything is compliant,” he noted. “We’ve got robust account matching tools and various different processes to make sure that we’re able to manage players that come in and make sure that we’re not accepting deposits or processing withdrawals that haven’t been checked.
“To do this, we have a number of chain analysis processes in place that enable us to look across the blockchain and investigate the origin of funds.”
As the popularity of cryptocurrency has grown in the press, so has coverage of fluctuations and volatility. So, how do we avoid this?
Simply said, it cannot. Casey stated that it is "nigh on impossible to completely protect against fluctuations" in the cryptocurrency market. However, there are steps that may be taken to reduce exposure to volatility.
He talked us through some of the ways Bad Hombre Gaming is assisting its partners in this regard, including the conversion of some bitcoin into stablecoins. "For customers, it's almost a 'crypto goes in, crypto goes out' policy." We do not convert monies since our consumers are playing games. So, if a customer deposits half a Bitcoin today and the value of Bitcoin triples tomorrow, they can still withdraw half a Bitcoin the next day.
“What can happen is that if a customer makes 10 Bitcoin in revenue today, and then the price changes by the end of the month, that can affect how much Bitcoin is available by the time you’ve cashed out.
“What we do is that on an ongoing basis, we convert money to stable coins – so USDt, for example. Theoretically, that reduces the risk of volatility. You protect yourself from negative price movements, but also reduce your exposure to positive price movements too.”
Since 2021, a few governments have committed to evaluate the usage of cryptocurrency in their economies. El Salvador, for example, was the first country to recognise Bitcoin as an official currency.
The United Kingdom and the United States have also announced intentions to examine digital currency usage, although the results have yet to be released.
Casey feels that regulatory adoption of bitcoin has been gradual due to the perceived pessimism surrounding the area.
“There seems to be some scepticism around crypto out there, but I think much of that is down to a lack of knowledge of the space. It’s very easy to be afraid of something you don’t understand,” he said.
“In a sense, crypto has a brand problem in that some people seem to only really associate it with the darker corners of the internet due to the anonymity. However, people seem to forget about its utility and the communities that it builds.
“I think that countries will be slow to work with crypto because of their perception, and the emphasis on KYC etc. There’s no reason that this can’t be done with cryptocurrencies though. But I think that there’s a perception that this is impossible.”
Casey says that many regulators do not appear to consider cryptocurrency as a payment option. Instead, he stated that there appears to be a problem with the 'branding', or perception, of digital currencies.
He concluded: “Regulators seem to be thinking about crypto in the wrong way – they don’t seem to think of it as a payment method, they solely think about it from a reputation perspective.I think that’s quite archaic. What I’d hope is that over the next few years, the utility of crypto will come to the fore and we can build this out into more mainstream cases.
“Hopefully, regulatory developments around the world will help that at a granular level rather than just within the gambling space.
“I think over time, as people get more comfortable with crypto payments and understand it more, people will see its utility and how it can just be incorporated into any of the existing regulatory processes that exist today. I do think it’s a missed opportunity for regulators. If they’re not looking at crypto, they should be.”
By fLEXI tEAM