Jamie Harvey's second installment on how to make crypto pay
For Winning Poker Network, the old adage ‘cash is king’ doesn’t ring true. Just three years after it accepted its first bitcoin deposit, cryptocurrencies now account for more than half of all transactions. Jamie Harvey explains what it was that convinced WPN to join the blockchain revolution, how it overcame the challenges in implementing such a strategy, and how the company is convincing its player base to join the party
At the Winning Poker Network we took our first bitcoin deposit in early 2015. By the middle of that year, bitcoin deposits counted for roughly 2% of our overall volume, which was still a very small part of our business.
Fast forward to today, and not only do we take bitcoin, but we also accept more than 60 other types of cryptocurrencies for both deposits and withdrawals. In fact, cryptocurrency now accounts for a staggering 60% of our overall processing volume.
So why the huge shift from conventional processing methods? And why are we aiming to expand our crypto offerings even further? There are a few reasons, the most obvious of which is that cryptocurrency payment processing is dramatically more cost efficient for both customer and operator than the more traditional methods.
Credit card transactions usually carry a price tag of 13-22% for the operator, with the need to implement a rolling reserve to defend against potential losses due to chargebacks. Person-to-person transactions such as Moneygram or Western Union tend to cost us 9-12% with an additional 2% in variables from issues connected to customer compensation.
Cryptocurrency operational costs, on the other hand, come in at 2.7-3.5%, making it by far the most attractive option to us as an online poker network. If you add in the fact that the individual customer value is much higher for those that use crypto than those that don’t (because of the convenience and ease at which they can deposit, and the higher transaction limits), then embracing this new technology was a profitable strategy.
But while we’ve managed to successfully incorporate this new payment processing method into our gaming business, and save millions of dollars in processing fees over the past few years, the transition didn’t happen overnight.
Change is hard, especially in business, and introducing a new way of doing things, or a new technology, can lead to more than its fair share of challenges. Accepting bitcoin and cryptocurrencies isn’t as simple as adding another credit card to your list of processing options. There are a whole slew of different variables to consider. Here are a couple of major ones we ran into:
Price fluctuation: This is a big one, not just for us, but for the customer as well. The swings associated with bitcoin for example, have been staggering. In mid-December 2017, the leading cryptocurrency hit an all-time high of close to $19,800, a far cry from the $7,500 or so it’s valued at today.
Players who don’t traditionally invest in or hold cryptocurrency are not interested in experiencing a possible downswing in the time it takes to make their deposit. For this reason, we had to form a process in dealing with exchange rates.
When a customer requests a deposit, we tell them how many dollars they’ll get for the amount of bitcoin they want to bank. We then produce the BTC address for them to send the bitcoin to, and so long as the customer sends it within 15 minutes, we’ll honor the dollar amount previously agreed. Thus WPN will take on any currency fluctuation that the coin may experience during the time it takes us to process the deposit.
For withdrawals, we give players the amount of dollars that they request in bitcoin, whether it takes us an hour or a day to process. So for example, if you request a bitcoin cashout of $2,000, you’re always going to get $2,000-worth of bitcoin.
Obviously, this does increase the exposure on our end, so we had to develop processes to mitigate risk. To this end, we hired a team of cryptocurrency investors, who are constantly monitoring our positions in each type of coin. We also had to determine exactly how much USD or bitcoin we needed to enable us to handle every deposit and withdrawal request on any given day.
Customer education: Bitcoin’s recent coverage in the mainstream media has done wonders to educate our player base as to what it’s all about. Still, the vast majority of people remain clueless about what bitcoin and cryptocurrency is, let alone how to execute the steps involved to make their first deposit.
We needed to provide as simple an explanation as possible as to what a cryptocurrency is, and how to use it. We gave the customer a step-by-step guide, from choosing a wallet or exchange, to how to purchase their cryptocurrency and then send it our way.
We also had to be very careful about what wallets and exchanges we recommended. Some players in the game are much more secure than others, and there have been plenty of instances of early disasters and stolen money.
Take the popular Tokyo exchange Mt. Gox, which at one point was trading roughly 70% of worldwide bitcoin transactions. It ended up being the victim of a massive cyber-attack that resulted in more than $8,750,000-worth of bitcoin being lost to hackers. If we had sent our customers there in the beginning, we’d have had a lot of unhappy people on our case.
To ensure impartiality and avoid potential problems, we monitor the top sites and constantly update our information. Then, rather than recommending just one exchange, we send our players a list and let them make an informed choice.
Accountability is also one of the major reasons why we decided to accept 60 cryptocurrencies instead of just bitcoin like many of our competitors. Sure, bitcoin is currently the market leader and by far the most-used cryptocurrency among our player base. But still, anything can happen and we don’t want to be one-dimensional. If people’s cryptocurrency preferences change, or if there’s a security flaw in the blockchain, we want to be able to offer the alternative that people want.
Despite these challenges, incorporating cryptocurrency into our business has been well worth it. In fact, just seeing the dramatic boost to our bottom line and knowing the success that cryptocurrency has had on our business, makes us very excited about the future and the benefits still in store. This is true not only for our business, but for the entire online gaming industry.