How Do Online Casinos Work?

Author: Iasmina Bunea Updated:
How online casinos work

Online casinos may seem simple, but the truth is, there is a lot of work behind them that makes them work the way they do.

Many elements make a gambling platform, and each has its essential role. You will learn how to do online casinos work, how they make a profit, and where everything they offer comes from!

  • How do online casinos work?
  • The first online casinos
  • How does online gambling work out its profit?
  • Conclusions, Methodology, and References

How do online casinos work?

Thanks to technological advancements, casinos have evolved considerably from their land-based ancestors to the gambling sites we may join today.

The online version comes with a faster-playing pace, allowing participants to switch from one game to another at any point in a matter of seconds.

Moreover, what makes online casinos more popular each day is their convenience. You can play from anywhere, and their special features that players cannot benefit from in a land-based casino.

If land-based casinos are relatively easy to understand for some players, are plenty of technologies, legal aspects, and essential protocols behind online gambling sites.

What is KYC, and why is it important

KYC, short for Know Your Customer, is a process businesses use to confirm their customers’ identity and verify their financial information.

What is KYC and why is it important

The KYC process may be a nuisance to some players, but it protects them and the online casino. It prevents underage gambling and blocks fraud, bribery, corruption, and money laundering.

How do online casinos work with KYC systems?

During the process, customers are required to provide the following information:

  • Full name;
  • Address;
  • Date of birth;
  • Address;
  • Phone number.

To prove the age and identity, the user has to send a photo or a scanned image of their passport, ID, or driver’s license. The address will also need to be confirmed as accurate, so a utility bill or bank statement no older than three months is required.

Notify customer support whenever your details, such as phone number or address, change to avoid future issues!

Anti-Money Laundering Measures

Some casinos will ask their players to further financial verification and provide additional documents.

These are required to verify the payment method or the source and legal acquisition of funds. Also, casinos need to make sure the account owner makes the deposits.

Documents for AML Checks

  • Scan or photo of the bank card used or other payment method;
  • Pension;
  • Payslip;
  • Bank statement;
  • Dividends;
  • Trust deed;
  • Director’s remuneration;
  • Savings account.

Some online casinos will perform soft credit checks. These do not affect your credit score, but if the information found does not match the one you offered, you will be contacted and asked to provide further information.

How does online gambling work with Payments?

Online casinos need to offer various payment options to allow players to enjoy games using real money.

They have to first negotiate with the payment system providers and agree on their integration on the website and the fees.

Fees

Even though players do not have to pay extra charges most of the time, the casino operators pay fees to the payment providers.

These are discussed and agreed upon for each case so that they may differ from one site to another and from one payment option to another.

Third party payment providers

The payment providers are third-party companies, which adds to the security layers the players benefit from.

This is excellent news for gamers, as the casino and the payment system protect their money and financial information.

Deposits are performed instantly or in a matter of minutes, but cashouts usually take longer. This happens because the online casino’s team has to verify the payment request and, in some cases, manually approve it. This is especially true for larger amounts of money. This fact is why fast withdrawal casinos hinge part of their attractiveness on the quick resolution of the payout process.

E-wallets payments

Payments made via e-wallets are performed faster.

When a user requests a withdrawal via debit card or bank transfer, the bank will run its checks and approve the transaction aside from the casino’s verifications.

This means it takes even longer to get the money from the casino.

Currencies

Casinos may offer a wide variety of currencies players may deposit in. However, most often, they operate using a base currency.

For the Canadian market, this should be CAD, but some choose to operate in EUR or USD.

The payment process can involve automatically exchanging the money upon deposit or withdrawal, for which the casino pays the conversion fees from the amount exchanged.

It will always be better to play on platforms in your currency to avoid losing money in the exchange process. This goes beyond displayed or accepted currency. It is ideal if the operator holds its funds in your national currency.

Game Collection and software providers

Collaboration with many software providers and extensive game collection is great for any gaming site. However, casinos do not own the games on their websites, nor do they control them.

It is software providers who create the games, and they run on their servers, regardless of the platform the user enjoys them on.

Furthermore, progressive jackpot slot machines will pay out jackpots with money from the software provider, not the online casino. These jackpots are continually increasing due to all gamers playing the same game on any platform it is available on.

How do online casinos work with game providers?

Casino operators strike deals with developers to feature their catalogue on the platform. Some casino platforms offer in-house games, but this is a rare occurrence.

Collaborations between online casinos and software providers, just as in the case of payment systems, come with specific fees for the casino operator. These vary from one software provider to another and may also change during negotiations.

Game Fairness

All casino games run on a Random Number Generator. The licensing authority and third parties in charge of auditing the software provider will check if the RNG works properly, conferring fairness to the game.

The RTP (Return to Player) is also set by the software provider for each game, not by the casino.

Top online casinos come with various games of all types, created by many software providers, including the most famous in the industry. This attracts more players and helps them trust the platform more while offering them the diversity they need to return and play more.

More software providers on a platform offer a wider variety of games for the players and show the platform is trustworthy.

Promotions

Online casinos create promotions to attract and retain customers. They come in many categories. Each type of promotion functions differently and concerns a different type of player.

New player bonuses

  • No deposit bonuses: you receive promotional items or funds to use with no payment required, most often being triggered upon sign-up or the use of a bonus code.
  • Free spins: a subclass of no deposit offers, free spins are promotional rotations usable on a variety of slots. Most applicable conditions are imposed on the resulting winnings.
  • First deposit promotions: these bonuses will generally depend and even match your initial payment on the platform. They prove more generous than no deposit offers.
  • Welcome packages: Instead of only awarding you for your first deposit, welcome packages come with several offers per multiple payments. They are the most extensive sets of rewards.

Existing player bonuses

  • Reload bonus offers: Instead of prioritizing the few initial deposits, reload offers will award you with a bonus each time you add funds to your account.
  • Seasonal / Recurrent promos: You receive bonuses based on specific dates or times of the year. These can also be daily, weekly, or monthly.
  • Cashback Schemes: Instead of receiving promo items upfront, you recover a certain amount of your wagered, or lost funds.
  • Refer a friend deals: Once you are a member of a platform, you can send an invitation to a fellow gambler. Once your friend joins, one of you (or both) receives a bonus.
  • Loyalty offers: you are awarded bonuses either via a loyalty scheme or upon reaching a certain VIP level.
promotions

Aside from this general categorization, there are many other types of bonuses.

Lesser-known bonus types

  • Sticky Bonus – these promotions contain an amount of money, be it fixed or directly proportional to the deposit, but the bonus amount will be deducted from the winnings upon withdrawal. This allows the player to play with borrowed money instead of genuinely free money.
  • No wagering bonus offers: Generally, you need to use the monetery equivalent of your bonus several times over. With no wagering offers, you don’t.
  • Free Bonus – this is usually a fixed amount of money players get regardless of their deposit over the minimum limit;
  • Exclusive deals – these are promotions created by the casino in partnership with another website, usually a bonus aggregator such as CasinoBonusCA.

All deals come with specific requirements and rules set by the casino. They vary from one promotion to another and among casinos.

General Bonus Rules

  1. Minimum deposit – this may be the minimum deposit the casino requires, or it can be a different amount that only applies to one promotion
  2. Wagering requirement – always shown as a multiplier, this requirement shows how many times the player needs to wager the some amount before cashout. This may apply to either the bonus, the deposit, or the winnings. In some cases, this applies to a combination of these. Unless this is completed, no winnings from the promotion can be cashed out, but some promotions come with none;
  3. Maximum cashout – regardless of the amount won from a deal, this is a limit of how much the player may withdraw from the winnings. The money exceeding this limit is void.
  4. Availability – promotions usually come with a time limit after which they expire and are forfeited.

You can find all the information on an offer in the Terms and Conditions section and Promotional Rules. Players are advised to always read these before proceeding to use any promotion.

Licenses

How do online casinos work legally and fairly? They need to employ several policies imposed in the licensing of gambling activities.

There are multiple such authorities, but their practices and stringency levels differ.

Licensors for the Canadian Market

  • Malta Gaming Authority (MGA);
  • United Kingdom Gambling Commission (UKGC);
  • Kahnawake Gambling Commission (KGC);
  • Curacao Government.

Frequent Licensing Requirements

  1. Owners are senior management are fit to conduct such business and have no criminal records;
  2. The RNG software is regularly tested and validated;
  3. Customer support is provided via phone, live chat, or email;
  4. All gaming software must display elapsed time for players to keep track of their gambling;
  5. Quick and fair responses to complaints.

Verification Process & Multiple Licenses

Each authority comes with its requirements and conducts its examination process. This often includes close examination of the games, incorporation documents, the processes related to conducting the games, terms and conditions, rules and policies, and technical documentation of both the control and gaming system.

These authorities each have their fees, both up-front and annual. The more stringent ones also have higher fees, making it possible only for the competent operators to obtain a license.

Some online casinos have a single license, proving they are running legally and fairly. However, if more authorities checked and licensed one website, you may rest assured everything is working properly.

How do online casinos work out customer issues?

The customer support of an online casino can be provided in-house or outsourced. It can be provided via multiple communication channels such as email, phone, Live Chat, and even social media and Skype in some cases.

In-house customer support is the best because the agents work for the online casino, so they know the industry better and have more information about the platform. When the support is outsourced, the agents have less information on the casino and may not be too familiar with the industry.  

For faster communication, most Canadian players prefer using Live Chat.

Data security

How does online gambling work with your data? Data security is crucial for both gamers and online casinos.

All the information shared by or collected from customers must remain private and away from any hacker’s hands.

Data Security Layers

  • Firewall – much like the firewall on our computers, the ones virtual casinos use block unwanted access of anything suspicious on the network;
  • SSL Encryption – Secure Socket Layer Encryption keeps all the transferred data safe by encrypting it during its transfer and decrypting it on its arrival. This way, in case any piece of it is intercepted, it will not be decoded;
  • Privacy Policy – now that the information is successfully and safely collected, what the casino does with it, and how long it will keep it is also essential. This information can be found in the Privacy Policy, and every player should read it.
Data security

A clear and transparent Privacy Policy signifies that the platform is secure and fair. Gambling sites generally post it in their footer so that you can access and read it.

How white label casinos work

White label products, by definition, are created by a company and rebranded and sold by another. This can be done for online casinos too. There are many white label casinos out there thanks to the clear advantages this brings:

  • The setup may take even a couple of weeks;
  • Payment processing and fraud prevention and detection systems are handled by the white label solution along with the risk management;
  • Customer support is usually part of the white label services package;
  • The legal and licensing part will also be taken care of.

This makes it easier and faster for casino operators to launch a product that works properly, allowing them to focus on marketing and management.

The first online casinos

1994 was the golden year for online gambling. In two different parts of the world, two forces were about to change gambling forever.

The First Act, the First Company

The government of Antigua and Barbuda passed the Free Trade & Processing Act. At the same time, Microgaming was established on the Isle of Man.

The law gave companies the chance to get licenses from this small Caribbean nation and operate online casinos.

The Missing Piece: CryptoLogic

Only a few months later, in 1995, CryptoLogic, the missing piece of the puzzle, made an appearance. This company specializes in real money transactions over the Internet.

This is not only how do casinos work, but the crucial aspect for making a profit. Cryptologic made the creation of a real online gambling platform possible.

Contender for the First Online Casino

Microgaming launched its gaming platform, but even though the website says it dates from 1994, it said it did not officially launch until 1998.

This means that CyptoLogic launched the real first online casino in 1996. Regardless of the time aspect, this was the first gaming platform that allowed players to bet real money via the Internet.

By the end of 1996, approximately 15 Internet gaming sites were available, and by 1997, players worldwide had access to over 200 online casinos, sportsbooks, and Poker sites.

How does online gambling work out its profit?

Online casinos are businesses, and their profit comes from the customers’ wagers. They have to attract players using promotions and other enticing features to increase their profits.

The more people deposit and come back to play more. The more unlucky bets are made, resulting in more profit for the casino.

The House Edge

The system that helps online casinos profit even when players win is called the house edge. This formula is the base on which the casino will keep a percentage of the player’s money each time they play.

It is usually around 5% and, even though it may not sound like much, it is a substantial amount considering the number of active players a casino usually has.

Commissions

Commissions are also collected in games such as Poker right before they start. Some casinos take a percentage of the bets, while some have a fixed fee all players need to pay before the round begins.

The casino’s role in this type of game is only to be the dealer, which gets it no profit after the game ends.

Conclusions, Methodology, and References

Online casinos are difficult to create from scratch. They require plenty of money to be invested in developing every aspect they need to work correctly.

Everything has to meet high-quality standards for the operator to be granted a license from the visual design to the games, payments, and customer support. However, some may choose to go with white label solutions that take care of everything for them, and they can market a product created entirely by a different company.

The online gambling industry is very profitable both when players lose and win. The house edge and game commissions determine the platform’s profit, but they are still reasonable enough for players to enjoy playing and have a fair experience.

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