Inside Asian Gaming

INSIDE ASIAN GAMING | October 2010 10 Cover Story video streamed from a studio somewhere—it could be inside or outside China.” Online casino gaming for cash prizes is not officially tolerated by the Chinese government. But the operators of such services either officially renounce the targeting of Chinese citizens (if they are reputable companies with public profiles internationally) or adopt a ‘catch me if you can’ attitude if they are less reputable, changing domain names on a daily or even hourly basis to beat the attentions of China’s Internet censors. As any online gaming operator with customers in the PRC will tell you, the challenge is not somuchgettingplayers, but ingettingaccess to their money. Challenges include affiliate fraud, and more centrally the difficulty in collecting and banking player payments. China recently clamped down on the agents that funnel money fromonline players to service providers. Even more significantly, the government has also clamped down on payment processing companies involved in facilitatingpayment by credit or debit card for cross-border services including online gambling. Starting this month, any company wishing to be licensed as a payment processor in China must put down a capital deposit of RMB100 million (US$14.9 million). That’s a significant chunk of change to risk if you incur the displeasure of the authorities. “The whole of the online payment industry is being re-regulated now,” says a source with knowledge of the online industry. “From 1st October, online payment companies are required to have RMB100million registered capital in order to havewhat’s known as a third party payment gateway licence. The registered capital requirement used to be between RMB5 million and RMB10 million. There used to be several hundred online payment processors serving China. Many of them were funded by international venture capital firms. The big guys think the new system is a good thing because they can afford to put up the money. But the small guys are going to have to get out of the business.” “Whenever the Chinese government sees a problematic area, they try to regulate it by raising the financial bar. So you need to have huge amounts of capital deposited in a designated account. That means if something happens the government doesn’t like, it can lock up your money. Essentially they don’t want small participants in the market that they don’t know and can’t easily control. The government wants businesses to register with it, show it they have anti-money laundering and internal control procedures in place, and send transaction reports to the government everymonth. It’s actually a pretty effective way of regulating market activity in gaming and in other sectors.” Were this tactic to be used against the sometimes-unruly video parlour and gaming arcade sectors in China, it could quickly bring them to heel. The history of pachinko in Japan, however, shows that today’s ‘grey’ operator can soon turn into tomorrow’s gaming elder statesman. Don’t bet against one of China’s gaming arcade owners one day becoming a billionaire. Online casinos—popular with Chinese players Log onto www.asgam. com for the latest industry intelligence and a subscription to our digital edition—all absolutely free A Sure Bet Show me the money—a million more buys a Chinese online payments licence