Evolution in consumer payment preferences and changing legislative requirements for cash payment are bringing new opportunities to Lottery’s. Most Lottery’s still operate under “cash only” laws prohibiting the use of payment cards or iWallets for payment, but that is changing. Lotteries have identified a connection between aging demographics of lottery players and younger consumer’s preference for electronic payment. The conclusion is that without modernization, lottery sales will suffer. Several States Legislatures have acted making iLottery, electronic payment and sport betting legal. These innovations will bring change to lottery and with it, new business issues. 

Online or iLottery requires electronic payment. Most of us have used Uber. One of the most convenient aspects of Uber is the way payments happen seamlessly in the background. You open the app, type in an address and watch your car approach. It’s a great no hassle consumer experience. Lotteries are working hard to make the digital lottery experience as easy as Uber. In states where electric payment is legal, but not on-line play, vending machines and the POS can accept card and mobile payment.

The introduction of online and iLottery machines means electronic payment will be accepted. Accepting electronic payment adds a new cost, transaction fees (swipe Fees). During the recent PGRI Lottery Expo in New York, the panel discussion “Lottery Modernization: so much to do, so little time” offered information on electronic payment. One panelist stated that the average cost of a transaction fees to Lotteries are approximately 2%. He also stated the average electronic transaction value at $43.00 for credit and $27.00 for debit. When you do the math, that’s $.86 and $.52 per sale, who pays the transaction fees has become a hot topic. Some lotteries are paying merchant transaction fees “above” the retailer commission. Other States leave it to the merchant, it’s their choice to accept electronic payment and fees. While the early evidence is that the introduction of electronic payment generates enough lift sales enough to pay for the transaction fees, modernization also means the introduction of alternative payment providers. Alternative payment providers like PayPal, Neteller and Lotto Payment Association offer consumers new payment options and sometimes lower transaction fees. 

Electronic payment opens lottery to new types of promotions and marketing opportunities. The industry has seen several innovations that enable the purchase of lottery tickets “in-lane” at grocery or convenience stores. These solutions all involve technology that leverages the existing gift card “payment rails" passing the transaction fees onto retailers. Some Lotteries have agreed to refund these costs, others have not. In states where iLottery is active, players are given multiple options to pay including credit, debit, PayPal and more. Lotto Payment Association is an innovative electronic payment company. LPA is a Boca Raton based company that is building a new payments platform designed specifically for lottery. LPA is a closed-loop payments platform. BuyLottoNow is an eWallet. LPA is unique for two reasons. First, consumers fund their purchases by depositing loyalty points into their eWallett opening the lottery market to billions of dollars frozen in consumer loyalty accounts. Secondly, as an alternative payment provider, LPA’s fees are significantly lower than traditonal electronic payment providers.

Lotteries can be excited that modernization, including digital lottery and electronic payment, will open the market to younger, more dynamic customers, helping Lotteries do good work for their important social causes. 

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