Inside Asian Gaming

September 2008 | INSIDE ASIAN GAMING 7 Cover Story M any Asians can’t easilymovemoney across borders or even within national boundaries in order to pay for gambling. Over time, they’ve got into the habit of expecting credit and can be quite choosy where they get it, even shopping around for the best deal. Credit due “Chinese people think: ‘Why should I give you money in order for you to give me gambling credit?’ They prefer to use the operator’s or agent’s money to gamble, then if they lose, they say ‘I’ll pay you back’,says Hwa-Min Hsu,founder of iFaFa,a Philippines- based and Philippines-licensed provider of services to the online gaming industry. The agents are the lifeblood of cross-border and domestic gaming in Asia, adds Mr Hsu. “You have to know the agent system in Asia if youwant to provide gaming services here,” says Mr Hsu. A difficulty is that the operation of agents falls into a legal grey area in many countries. Mr Hsu, an international lawyer and marketing expert, is well practised at negotiating complex and sensitive issues.He was awarded anMBE by the British government for his assistance in furthering diplomatic and commercial links between the UK and Taiwan. The work of iFaFa includes advising foreign companies on the opportunities and the barriers to foreign investment in online gaming targeted at Chinese players. It also provides agent networks, start-up support for gaming software, hosting and live online studio facilities. Business model The agent system is clearly a potential barrier to companies interested in investing in Asian online gaming—especially foreign companies without the cultural knowledge of the system. The provision of credit via agents fundamentally affects the dynamic of the business model for cross-border and online gaming in Asia in general, and China in particular. The liquidity of service providers is absolutely dependent on the efficient running of an informal though nonetheless highly organised system of such agents. There are a number of reasons for this state of affairs. First, the official banking system is often less developed in provision of personal credit services in Asia than in Europe and North America. Many consumers don’t have credit or debit cards to pay for gaming services electronically either on a cross-border basis or in-country even if they wanted to. Second, the picture is further confused by layers of protectionist economicpoliciesatnationallevel,oftenincludingcurrencyexchange restrictions designed to prevent the country’s wealth being exported The Secret Life of Agents Asia’s system of gambling credit is a real challenge to foreign investors