Everi White Paper

Improve your odds on delivering the best customer payment experience How resorts can thrive in a complex Introduction multi layered payment environment while meeting regulatory requirements. 4 SPONSORED BY Every casino operator wants to make it easy for their patrons to play and extend the play experience, yet all too often... Multiple devices forpayments acceptance 6 Casinos can’t be fully standardized because different suppliers make unique gambling devices that enhance the consumers’ gaming experience...

EVERI | Improve your odds on delivering the best customer payment experience External publication terms for Mercator Advisory Group information and data: Any Mercator Advisory Group information that is to be used in advertising, press releases, or promotional materials requires prior written approval from the appropriate Mercator Advisory Group research director. A draft of the proposed document should accompany any such request. Mercator Advisory Group reserves the right to deny approval of external usage for any reason. Copyright 2021, Mercator Advisory Group, Inc. Reproduction without written permission is completely forbidden. Brian Riley, Director, Credit Advisory Service [email protected] 1-781-419-1720 Mercator Advisory Group is the leading independent research and advisory services firm exclusively focused on the payments and banking industries. We deliver a unique blend of services designed to help clients uncover the most lucrative opportunities to maximize revenue growth and contain costs. Advisory Services. Unparalleled independent and objective analysis in research documents and advice provided by our Credit, Debit and Alternative Products, Prepaid, Merchant Services, Commercial and Enterprise Payments, Emerging Technologies, and Global Payments practices. Primary Data. North American PaymentsInsights series presents eight annual summary reports based on primary data from Mercator Advisory Group’s bi-annual surveys of 3,000 U.S. adult consumers to determine their behavior, use, preferences, and adoption of current and emerging payment methods and banking channels to help our clients identify and evaluate business opportunities and make critical business decisions. Two other Mercator survey series—Small Business PaymentsInsights and Buyer PaymentsInsights—each receive coverage in three reports annually. Consulting Services. Services enabling clients to gain actionable insights, implement more effective strategies, and accelerate go-to-market plans. Offerings include tailored project-based expertise, customized primary research, go-to-market collateral, market sizing, competitive intelligence, and payments industry training. PaymentsJournal.com. The industry’s only free, analyst-driven, online payments and banking news information portal delivering focused content, expert insights, and timely news. For additional copies of this report or any questions, contact Mercator Advisory Group at 781-419-1700. October 2021 | Customer Convenience of Choice | 2

EVERI | Improve your odds on delivering the best customer payment experience Table of Contents Introduction Multiple devices Multiple Third- forpayments Party pARTNERS 4 acceptance AND INTEGRATIONS Every casino operator wants 6 9 to make it easy for their patrons to play and extend Casinos can’t be fully Every device and application the play experience, yet all standardized because in the payment environment too often... different suppliers make adds friction associated with unique gambling devices that adding a new payment type... enhance the consumers’ gaming experience... sMARTPHONES IN managing cash the way forward THE CASINO & banks 12 10 11 By recognizing the areas that Smartphone technology is We have identified that create a high level of friction, responsible for driving signifi- controlling cash in is the solutions become clear... cant change within the casino sometimes a regulatory environment... necessity for responsible gaming requirements... A Seamless Casino Knowing your Conclusion Experience customer improves everything 16 13 15 Do not let compliance be the Consider the experience sand in the gears of customer consumers have with PayP- Once payments and rewards engagement and innovation. al or Amazon. By providing are operational online and in Begin the journey by asking.... those entities with personal the mobile app, the casino can information... expand its data acquisition.... OCTOBER 2021 | Customer Convenience of Choice | 3

EVERI | Improve your odds on delivering the best customer payment experience CUSTOMER CONVENIENCE OF CHOICE (CASHLESS OR CASH) Every casino operator wants to make it easy for their patrons to play and extend the play experience, yet all too often the payment process can interrupt that experience. The interruption can be caused by any number of problems in accepting a particular form of value, payment card, payment device or availability of cash. October 2021 | Customer Convenience of Choice | 4

EVERI | Improve your odds on delivering the best customer payment experience OCTOBER 2021 | Customer Convenience of Choice | 5

EVERI | Improve your odds on delivering the best customer payment experience Every casino operator wants to make it easy MULTIPLE DEVICES FOR for their patrons to play and extend the play experience, yet all too often the payment PAYMENT ACCEPTANCE process can interrupt that experience. The interruption can be caused by any number of Casinos can’t be fully standardized because problems in accepting a particular form of different suppliers make unique gambling value, payment card, payment device or devices that enhance the consumers’ availability of cash. gaming experience. These devices are designed to be compliant with gaming These problems are not unique to regulatory requirements that vary across casinos. Large merchants, including Amazon 300+ jurisdictions. As shown in figure 1, the and Walmart, invest heavily to make casino has several different acceptance payments as easy and as invisible as they can. devices purchased from multiple vendors These merchants start by connecting to every to support multiple gaming systems (cage, international and regional payment network slots, Keno, etc.). This environment is made and even to small local networks. Next, the more complicated by the addition of merchants need to make sure they support the non-gaming systems (hotel, restaurants, most popular payment devices those networks merchandise, etc.) which would benefit allow, from payment cards to mobile apps. from the ability to accept casino-specific Merchants today are responding to increased value, such as reward points. These systems use of mobile wallets (Apple Pay, Google Pay, vary from casino owned to third-party Samsung Pay), which were adopted by 28% of providers servicing unaffiliated merchants that U.S. consumers in 2020 (Source: Mercator are simply renting space from the casino. Advisory Group, North American Payments Insights Survey, June 2020). Depending on the customer base, it may also be important to support international payment types such as FeliCa in Japan or the e-Krona in Sweden. But adopting smartphone payment methods These devices are designed to will not drive greater loyalty. To gain and hold be compliant with gaming consumer loyalty, merchants have deployed regulatory requirements that their own mobile applications that support vary across 300+ jurisdictions. highly targeted marketing and incentives while also making payments almost invisible. These incentive programs provide both an online and mobile experiences that are consistent. This white paper will identify the issues that Due to the complexity shown in figure 1, complicate deployment of payment solutions it costs casinos considerably more than in casinos which include the addition of digital traditional merchants to address new payment gaming products, an increasing number of third types, which include Apple Pay, Google Pay, parties that must be managed, as well as the Samsung Pay, and, more recently, QR Code need to address the regulators, including the payments. This payment acceptance payment networks. After explaining the unique complexity also complicates the backend challenges casino operators face, we will processes associated with regulatory oversight, recommend an implementation process to tax planning and corporate accounting. address those issues. October 2021 | Customer Convenience of Choice | 6

EVERI | Improve your odds on delivering the best customer payment experience • Retail • Social Gaming • iGaming • Sports Wagering • Lodging • Digital/Loyalty Integration • Operator Owned • 3rd Party Retail • F&B • Events • Digital/Loyalty Integration • Gaming Tickets • Wagering Accounts • Regulated Systems • CMS/Loyalty • Compliance/AML • Digital Integration • Banking as a service • FDIC Insured Deposit Account • Cross Property, State, or Funds Type Transfer • ATM Self Service Devices • Payment Card Network Transactions • Check Cashing/Warranty • Crypto and Real-Time Payments • Digital Integration Figure 1, Source: Mercator OCTOBER 2021 | Customer Convenience of Choice | 7

EVERI | Improve your odds on delivering the best customer payment experience Figure 2 identifies the different payment Code, etc.) and their own regulations, which networks and the different payment types that includes security requirements and settlement every casino would like to support at every process. All of these issues must be addressed one of its payment acceptance locations. for each unique device the casino has on the However, the complexity of the casino floor floor and will often be different even for and regulatory oversight, shown on the right similar devices due to different versions of hand side of figure 2, likely makes that goal hardware or software. The software in each extremely difficult to attain. device accepting payments must be updated on a regular basis and audited annually The casino should strive to support as many according to Payment Card Industry Data card networks as it can to maximize customer Security Standards (PCI) to assure the casino convenience. This is difficult in a casino payments infrastructure meets security because every card network supports different requirements. When any changes are made, acceptance methods (swipe, contactless, QR such as enabling the acceptance of a new payment type or loyalty program, then the This is difficult in a casino entire gaming system must be recertified to because every card network the standards established by the networks and supports different acceptance by the appropriate gaming commissions. methods (swipe, contactless, QR Code, etc.) and their own With tens of different systems deployed, regulations, which includes some under casino management and others security requirements and under themanagement of a franchisee, settlement process. upgrading gaming devices and POS systems for new payment methods becomes extremely complex and costly. In addition, there are many third parties involved in this process that will all expect to profit from time spent making the requested changes. This brings us to the complexity created by multiple third parties. Figure 2, Source: Mercator October 2021 | Customer Convenience of Choice | 8

THIRD-PARTY EVERI | Improve your odds on delivering the best customer payment experience PARTNERS AND INTEGRATIONS enhancement of loyalty programs or, in some instances, eliminate the ability for the programs to be deployed in an omni-channel environment at all. Any variations in how a deployed device supports payments or rewards results in a poor customer experience as they move across Every device and application in the As a result, casino payment environment adds friction associated with adding a new payment type, deploying or device complexity tends to either enhancing rewards and loyalty programs, and especially for managing the security and net- delay the enhancement of loyalty work certification of the entire payment system. programs or, in some instances, The more devices and systems involved in eliminate the ability for the payments, the greater the effort and cost of maintaining payment security. The primary programs to be deployed in an cost driver is the necessity to maintain end-to-end protection from the payment omni-channel environment at all. terminal within the device on the casino floor all the way to the payment network. casino locations. Furthermore, this complexity Maintaining this protection requires data makes it even harder to address the multiple communications integration and security casino regulatory bodies’ restrictions associated integration across all the devices, all the with how customers use gaming rewards and software versions, all of the device incentives. suppliers and network suppliers. This is required at every location where a payment While customer loyalty is derived by making or customer identifiable information is it easy for the customer to use earned points collected. The more devices, software versions, and rewards, it is often necessary to networks, security suppliers and third parties understand that while loyalty rewards have there are, the greater the time, effort and cost their own set of rules driven by reinvestment associated with the annual PCI certification optimization and fraud mitigation, payment process. As complexity increases so does the and bank transaction rules operate around annual expense. velocity limits and regulatory logic that requires additional support across various While security costs increase with touchpoints. This complex environment, complexity, so does the effort and cost especially in multiple integrations, can make it associated with deploying the casino’s own difficult to gather the data required to produce reward and loyalty solutions and the casino’s high quality analysis to target consumer own mobile app, and enabling these preferences that can be used to create high- important services across all aspects of the impact marketing and incentive offers. The casino’s omni-channel operations. The more complex the casino floor environment, complexity is not limited to the casino floor, it the more difficult it is to implement loyalty is also related to the online and mobile services and financial guidelines and policies. the casino operates. As a result, casino device complexity tends to either delay the OCTOBER 2021 | Customer Convenience of Choice | 9

EVERI | Improve your odds on delivering the best customer payment experience SMARTPHONES IN THE CASINO Smartphone technology phone manufacturer and/or because it represents is responsible for driving operating system supplier important intellectual prop- significant change within the becomes an integral part of erty. As a result, it is unlikely casino environment. Figure 3 the regulatory oversight these companies will disclose identifies four different environment, and it is unlikely enough information regarding primary uses for smartphones these entities will participate. their hardware and software within casino operations. to satisfy regulators. Even more problematic is The most basic application the use of a smartphone as a Figure 3, Source: Mercator is when the smartphone is smart POS, as shown on the used by customers to access right. This has become com- information about the casino mon for many merchant and to initiate payments at categories because the various casino venues. At the smartphone costs less than top of figure 3, Samsung Pay is specialized hardware and new used by the customer to load hires are typically already funds into their casino gaming familiar with the user interface account. which reduces training needs. However, this will be very hard As consumer adoption of to implement in the casino smartphones in the gaming environment because demographic approaches gaming authorities have 100%, these devices become oversight responsibility for a critical tool for simple and every aspect of the payment easy payments by solution involving the gaming customers. Accepting floor or cage environments. payments from a smartphone is relatively straight forward This oversight includes for merchants and can be for every vendor that supplies a casino operators as well if the payment accepting device, the complexities indicated in inspection and certification of figure 2 are addressed. software that operates that device, along with all of This becomes far more the third-party security complex, however, if a casino technologies that implement wants to utilize a smartphone PCI compliance. wallet for its own rewards programs because of the So, consider how the need to regulations that surround disclose all of this information casino operations. If the casino will impact companies such as wants to utilize the standard Apple, Google and Samsung. smartphone wallet to The software these firms communicate rewards and implement is not disclosed in account balances, then that any meaningful fashion October 2021 | Customer Convenience of Choice | 10

EVERI | Improve your odds on delivering the best customer payment experience MANAGING CASH AND BANKS We have identified that controlling cash in is sometimes a regulatory necessity for respon- sible gaming requirements and to control how gaming rewards and incentives are utilized. But there are similar issues regarding accounting rules and tax management when customer deposits, rewards, and incentives are moved across the casino’s gaming environment, as shown in figure 4. It is not unusual for regulations within a juris- diction to require that funds placed in a certain account type, such as a wagering account, be kept in a reserve fund located at a bank with- in the casino jurisdiction. There may also be requirements associated with keeping certain funds within the state. These requirements complicate accounting and tax reporting as the funds are moved between local banks, state banks, and eventually the casino’s own corpo- rate bank as revenue. Knowing the status of the customer account and the status of the player as they move within the casino gaming environment can make this complex reporting requirement pos- sible in close to real time. This, in turn, greatly speeds up the ability to release cash from the reserves and documents the status for local, state, and corporate accounting as well as for all tax and regulatory bodies. The benefits of such a solution cannot be overestimated. Figure 4, Source: Mercator OCTOBER 2021 | Customer Convenience of Choice | 11

EVERI | Improve your odds on delivering the best customer payment experience THE WAY FORWARD: IMPROVING PROFITABILITY AND MITIGATING RISK By recognizing the areas ble to collect data required casino’s overall operations? that create a high level of for audits and certifications, friction, the solutions become assures partners are selected A central management plat- clear. The issues that face the that minimize integrations and form is needed that has the chief financial officer are the support the needs of regulato- rules and automation required issues that drive any prod- ry bodies, and condenses the to ingest data from the cus- uct deployment scenario. Of payment network map which tomer and the casino floor course, customer needs will reduces headcount required to that will address regulatory drive change as they adopt maintain the systems and the requirements while automat- smartphones, new payment accounting process. ing the accounting, tax audit methods, and new payment and cash management func- services, including PayPal and This requires a top-down tions. This assures that the P2P, in rapid succession. But by approach and not a casino issues associated with inter- accommodating these needs floor-driven, consumer-ori- nal accounting, marketing, in an undisciplined fashion by ented, bottom-up approach. tax planning, and compliance rapidly adding new partners, Figure 5 identifies the increas- reporting are baked into the new points of integration, and ingly difficult management deployed solution. Attempting ever more complexity, the ca- issues associated with each to address these issues with sino adds more complexities, new device or service added additional manpower after inefficiencies, barriers to inte- to the casino floor or else- implementation is not a good gration, and costs. The above where within the casino. The strategy, as the benefits as- chart is one such example. device being installed may sociated with a new front-of- well have extraordinary pay- house solution will be offset This lesson may be hard to ment services, payment con- by large back-of-house ineffi- accept. By slowing down and trols, and loyalty or incentive ciencies and cost. asking the right questions, offerings, yet, key questions smarter decisions can be made must be addressed. How will about technology and part- those systems interact across ners, which will simplify the the casino floor? How will the entire casino environment and cash be managed? How will customer experience. Simpli- the information derived from fication reduces the scram- the device be used across the October 2021 | Customer Convenience of Choice | 12

EVERI | Improve your odds on delivering the best customer payment experience IN PERFORMING AN AUDIT OF A MERCHANT, MERCATOR DISCOVERED THAT THE MERCHANT HAD BEEN SO BUSY ADDING NEW TECHNOLOGY TO ADDRESS CUSTOMER NEEDS THAT IT ENDED UP WITH FIVE DIFFERENT ACQUIRERS, BUT ONLY KNEW OF THREE, AND WAS ONLY ABLE TO PERFORM SETTLEMENT ACROSS ITS PAYMENT PARTNERS MONTHLY; LEAVING THEM EXPOSED TO FRAUD. FOCUS ON DELIVERING CUSTOMERS A SEAMLESS CASINO EXPERIENCE Consider the experience engagement platform, implementing loyalty consumers have with PayPal the Casino can deliver an programs and fail to meet the or Amazon. By providing appbased user experience that needs of customers on the those entities with personal is consistent across all mobile casino floor. While information, the customer devices and the Web, while impossible to implement all gains convenience and also providing instant at once, figure 6 identifies safety, which improves brand feedback to the customer. application features that satisfaction. While it is critical have been implemented by to implement these services Customers desire an merchants and may suggest in a safe, secure, and experience that is convenient, features that would appeal compliant way, it also simple, consistent, and to casino customers. So, the represents the most direct seamless across the question is where to start method by which a casino casino ecosystem. As the integration to deliver a can deliver the highest described, smartphone-based seamless environment for level of customer general purpose wallets are customers across all channels, convenience and not designed to support physically on the floor, on the engagement. By casino operations or gaming, mobile device, and online. creatingan account-based they prevent the casino from OCTOBER 2021 | Customer Convenience of Choice | 13

EVERI | Improve your odds on delivering the best customer payment experience Figure 5, Source: Mercator The days of quick and simple execution are when the constraints of over, if they ever actually existed in the reg- regulations, banking, cash ulatory environment of a casino. This is not management and tax audits are to suggest that large opportunities and high properly managed, the growth are in the past. PayPal operates in 200 implementation of enhanced and countries and yet still manages to address the entirelynew products can be regulatory structure in every country. The com- brought to market quickly while plexity in a casino is similar in scope, although maintaining the key processes the regulatory constructs are entirely differ- that arerequired to operate in ent. What this demonstrates is that when the such a heavily regulated constraints of regulations, banking, cash man- environment. agement and tax audits are properly managed, the implementation of enhanced and entirely new products can be brought to market quick- ly while maintaining the key processes that ar required to operate in such a heavily regulated environment. October 2021 | Customer Convenience of Choice | 14

EVERI | Improve your odds on delivering the best customer payment experience KNOWING YOUR CUSTOMER IMPROVES EVERYTHING Once payments and rewards ence to gaming regulations, a difficult goal to achieve, are operational online and in and monitor customer behav- which makes it essential to the mobile app, the casino ior. This also generates oppor- identify the integration points can expand its data acqui- tunities to analyze customers that delay a more consistent sition strategy to leverage for common traits that sug- solution. Rewards can be an these new tools and the more gest new offerings. agent for change because tightly integrated third-party they represent casino funds infrastructure. This extends Give Your App a Force that should be accepted at all the effort performed to con- Multiplier: Add Loyalty devices within the casino. As a solidate the POS systems for and Rewards result, the loyalty applications’ rewards to incorporate data ability to burn reward points being generated from all cus- The casino probably already becomes the driver for a more tomer touchpoints, payment, has deployed loyalty and consistent payment infra- account, hotel, restaurant, rewards programs. To maxi- structure. As important, for and gaming environments to mize results, those programs regulatory reasons the reward improve the marketing and should be front and center value needs to be tracked in- incentives delivered to your within the casino’s online and dependently of all other val- customers. By enabling cards mobile experience and should ue added to the account and to be stored and the casino work across all gaming plat- achieving this higher level of account to be linked to a bank forms. The multiple third-par- accounting also drives a more account, a consolidated casino ty providers and devices on consistent reporting solution account is formed which can the casino floor make that that can operate across all the better monitor the customer’s casino POS systems. casino and online activities, manage risk, prove the adher- OCTOBER 2021 | Customer Convenience of Choice | 15

EVERI | Improve your odds on delivering the best customer payment experience CONCLUSION Do not let compliance be the sand in the gears of customer engagement and innovation. Begin the journey by asking, How we can best utilize our existing internal and third-party resourc- es? The answer should help reduce the number of integration points that exist within the operations and recognize that no system is an island; every system, every payment, every reward is a shared commodity across an amazingly complex casino environment. Stay focused on compliance and accounting, and eventually, implement marketing on the casino floor to compli- ment other revenue generating areas using rewards and incen- tives. While there will always be walk-in customers that utilize cash for play, there needs to be a methodology that drives more of those individuals to open an account. Remain focused on the consumer experience and in particular the consumer account. With third-party integrations and multi- ple regulatory agencies watching, casinos have more operation- al complexity than most merchants. It is imperative to bring on a solution provider that knows how to integrate the multiple casino operational areas and third parties to deliver the desired solution. This requires knowledge of the suppliers and casino operations, but more importantly knowledge of those that can manage the regulatory issues associated with delivering the desired end state – a seamless online, mobile, and physical floor experience. With an integrated and well-managed infrastructure, the ca- sino can start to consider new innovations. At cash-out, might the casino offer an incentive to store the funds in the casino account, perhaps offer interest? Could the customer be offered a Me-to-Me transfer of the funds, perhaps to a friend or fam- ily still playing on the casino floor? Could the casino offer to send the funds directly to the customer’s bank account, and in doing so capture the bank account routing number so that the next gaming experience can be funded directly from the bank account? It is likely regulations and systems may prevent en- abling some of these ideas, but there are more ways to engage the customer than documented here. Working from the top down starts the integration of all the POS and payment devic- es, allowing innovation to flourish while keeping the regulatory environments at bay. October 2021 | Customer Convenience of Choice | 16