Klarna recently announced that, through its subsidiary SOFORT, it would enable its banks to integrate gambling blocks, which will help protect hundreds of thousands of consumers in the United Kingdom.
Klarna is a leading global bank that supports payments for online shopping services. It helps consumers save time and money and even control their finances. Now, Klarna allows a direct bank to bank payment between consumers and gambling facilities like Vulkan Vegas and also blocks them if needed.
How it all started
Back in 2018, the first bank that introduced a gambling block was Monzo, another bank that is in direct competition with Klarna. Monzo customers demanded something that would help them control their use of gambling sites.
Because of Monzo’s lead, most banks followed through and provided the same services. However, many gambling blocks only use cards to support gambling activities. Open banking was not covered by these operations.
The subsidiary of Klarna, SOFORT, was the first provider to integrate open banking in the gambling sector. However, this was not done by Klarna alone. The process and systems were developed by Monzo and TrueLayer in 2021.
Today, Monzo can extend their gambling block to all systems powered by Klarna. This will allow UK customers to do bank-to-bank payments immediately. Right now, there are more than 400,000 customers that Monzo serves in its gambling block channel.
How it all works
Klarna is one of the largest banking systems and aggregators globally. It focuses on open banking, which allows 15,000 banks worldwide to connect with each other. It is also the network that powers SOFORT, a direct bank to bank payment method, which is a subsidiary of Klarna.
There are 75,000 users or merchants across Europe that use SOFORT. The good thing about SOFORT is that only immediate payments are allowed when it comes to online gambling facilities. Klarna, however, does not allow its card products to be used on gambling or gaming sites.
With this new development, banks connected to SOFORT will know if a payment request is from a gambling company. From here, the bank will know whether or not to block the payment or let it through.
So, how does it help users? In the gambling industry, there are many customers or consumers who do not want to gamble anymore. And because they don’t want to gamble anymore, they want to make sure that the banking systems give them the ability to block payments.
With Klarna’s new system, consumers can work with their banks or open bank accounts from banks that have gambling blocks. From there, consumers will never have any means to fund their gambling activities, therefore, making them avoid gambling altogether.
The software code for this update is public. Klarna’s executives are calling on banks to make a small update on their end to help gamblers protect themselves.
Will banks take this code?
Yes, they will. The UK is one of the world’s biggest gambling markets. As gambling can be a cause of mental health issues, the government and financial institutions are working together to create legislation that will help protect consumers
The role of Klarna, SOFORT, and other financial institutions is to help mitigate the risks of getting addicted to gambling. Online gambling sites are accessible, and it is so easy to fund an account from a credit card or from a bank account.
Sadly, there are gamblers who wipe out a big chunk of their savings because of this level of accessibility. Banks are also at risk, as many gamblers use credit cards to fund their gambling habits. If these gamblers do not pay, the money goes to the casino operators.
If credit card companies do not get paid, there is a serious risk to a country’s economy. Gamblers that borrow money from credit card companies are borrowing the money of other depositors. If the gamblers do not pay their debts because they lost, the economy is at stake.
As such, Klarna and other banking institutions need to put preventative measures in place. If banks do not want to be involved in gambling, they can do so now. The code will allow banking systems to find out if the money transfer involves a gambling facility.
Today, there are many gambling sites that may masquerade as something else. When they request money from banks, banking systems do not know that it is a gambling site. As such, the banking systems will let the transactions happen.
In the end, the main goal of Klarna and financial companies is to protect consumers. Some gamblers are self-disciplined, but they need a machine that will prevent them from making deposits in a casino.
On the other hand, there are also hackers. They hack someone’s bank account and transfer funds to a casino online. To prevent this from happening, consumers need to work with banks that have a gambling block. With gambling blocks and systems in place, a consumer may get hacked, but the hacker cannot transfer funds to dubious destinations. As such, the money of the depositor is protected.