Not only will Citibank cease to allow online betting on its credit cards, it will also donate $400,000 to families hurt by gambling addiction. Citibank should gain good PR in the anti-gambling US, not to mention a reduction in fraud levels and lawsuits. However, the crusade against betting ultimately stands to drive American gamblers towards offshore payment systems.
Citibank will block online gambling transactions, after prompting from New York’s attorney general.
Citibank will no longer authorize online gambling transactions in the US, following a campaign by New York Attorney General Eliot Spitzer. Mr Spitzer, who is currently campaigning for re-election, has already persuaded banks such as MBNA and Bank of America to block the hobby.
Mr Spitzer has been arguing that Americans were gambling up to $4 billion a year on the Internet that would invariably end up in offshore casinos. He also believes the lure of eBetting has added to delinquency and underage gambling. Citibank, which holds about 12% of the credit card market in the US, will also donate $400,000 to families who have suffered from gambling addiction.
Citibank says it acted on the Attorney General’s concerns about the impact that gambling on credit may have on New York residents. The prompt response to Mr Spitzer’s worries, combined with the donation, should be a boost for Citibank’s image in many people’s eyes. The bank also stands to benefit itself: according to spokesperson Maria Mendler, Internet gambling transactions have an increased potential for fraud loss.
The block will also protect Citibank from further litigation by debt-ridden gamblers, some of whom have claimed that since online gambling is illegal, issuers should not have authorized their transactions in the first place.
The move by Citibank will prompt other banks to follow suit – and it has short-term benefits both for credit card issuers and some cardholders. However, in the longer term the embargo could prove counterproductive both for the banks and for Mr Spitzer.
Banning the use of US credit cards will encourage gamblers to use other online payment systems such as Paypal, which allow payments to individuals based offshore. The profits – and any problems – will go deeper underground, with US companies and citizens as the losers.
Related research: Datamonitor, 2001: Global online gambling
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