LeoVegas’ revenue in Germany took a “20-30%” hit because of PayPal ceasing to accept online casino payments, according to the operator.
The digital wallet was ordered by German authorities to stop allowing its services to be used for certain verticals earlier this year. PayPal announced that it would comply with these wishes in August, before the changes were fully applied last month.
All-in-all, LeoVegas believes that this clampdown had an effect of between €1 million and €1.5 million each month.
Gambling in Germany: the big picture
Online casino regulation in the EU’s most-populated country is complex. At the moment, only the state of Schleswig-Holstein allows this to be performed legally. By 2021, it’s hoped that there will be a permanent legal framework that will apply to the entire nation.
A regulated German market has the potential to be lucrative for affiliates. Online gambling in the country is currently – according to Business Matters – worth over €3 billion. While many states are unregulated, players are seldom prosecuted if they use an operator which is EU-based and accepts German customers. This was the main reason that PayPal was pressured to introduce the changes it did.
LeoVegas grows in the north
Despite the effects of PayPal’s clampdown, LeoVegas reported year-on-year increases elsewhere. In the three months leading up to the end of September, the group made €88.2m in revenue. That was up from €78.6m in the same period for 2018 – a growth rate of 12%.
Much of LeoVegas’ growth was within classic casino games. This made up almost three-quarters (74%) of gross gaming growth in Q3 2019. Returning customers grew by 12% to 199,023, but there was a 4% decrease in new depositing customers (135,019 in total).
LeoVegas President and Chief Executive, Gustaf Hagman, said: “We continued to show progress during the third quarter, in a difficult-to-navigate environment. We generated double-digit growth in both sales and operating profit.
“Greater regulatory complexity in several of our main markets has given rise to certain short-term challenges. However, it’s also raising the barriers to succeed in the sectors which benefit established companies.
“LeoVegas today has much more of an even distribution across all markets and brands. Half of our revenue is derived from locally-regulated markets, which contributes to greater stability and lower business risk.”
While LeoVegas still enjoyed a profitable quarter, PayPal’s German online casino shutdown highlights how fragile revenue streams can be.
