State-run lotteries have been evaluating the iLottery opportunity for several years as a way to enhance their core offering. With the rapid expansion of sports betting and online gaming, the time for lotteries to get in on the game has never been hotter, according to NeoPollard Interactive’s General Manager, Liz Siver.
A decade on from receiving the green light from the U.S. Department of Justice, iLottery’s potential for driving transformational player engagement remains largely untapped.
While regulated sports betting has exploded across the country following the overturning of PASPA in 2018, iLottery still only accounts for less than 5% of the $95bn U.S. lottery market (Source: TLF Publications, LaFleur’s Lottery Fast Facts 2021, U.S. Lotteries Unaudited FY21 Sales, Prizes & Government Transfers). Only 12 lotteries offer some form of online lottery sales, while only seven provide a full iLottery offering.
As digital lottery operations continue to perform, any former reluctance to embrace online platforms based on an opinion that these could take customers away from their core retail business, is a narrative that is changing.
“These concerns have now been replaced with a conversation about how iLottery is enhancing retail partnerships,” says Liz Siver, General Manager of NeoPollard Interactive, North America’s leading provider of iLottery services (Source: Eilers & Krejcik Gaming’s 3Q21 US iLottery Tracker).
“With a decade of iLottery experience in the U.S., each additional iLottery launch has demonstrated that there is no negative impact to retail lottery sales following the introduction of iLottery.
“The awareness and new player acquisition provided for by iLottery lifts the overall lottery brand and drives sales across both channels.”
Indeed, there is now evidence that retail sales increase more quickly in states that offer iLottery than those that do not.
In 2021, U.S. lotteries with iLottery programs enjoyed an average 23% increase in total retail sales in comparison with 2020.
NeoPollard’s own partner network in the U.S. generated more than $3.2bn in sales in 2021 – a year-on-year increase of 61%.
Furthermore, the inescapable growth of mobile and online betting revenues in the U.S. has underscored broader behavioral changes surrounding increased digital adoption by customers.
This has expedited the importance of lotteries advancing their own modernization efforts, particularly given the demographic challenges facing many operators. Based on research from one of NeoPollard’s operational markets, mobile iLottery players are on average 12 years younger than traditional retail lottery customers.
“iLottery is providing new audiences and younger consumers with a channel to engage with the lottery that matches their purchase expectations,” Siver says.
“One of the biggest upcoming challenges that the lottery industry as a whole will be facing is the coming of age of Generation Z, who have tremendous purchasing power. They are a digitally native generation of ad-blockers, so reaching these players will rely heavily on appealing to their e-commerce expectations.”
Variety lies at the heart of an iLottery offering. It is not just about catering to the demands of younger generations who want to play lottery games on their terms, but providing new channels of interaction through which the broader customer experience can be enhanced.
“All of the industry’s leading iLottery programs include a variety of products and promotions that provide retail partners with additional ways to drive foot traffic to retail stores and to increase revenue opportunities for the lottery’s network of retail partners,” Siver adds.
“For example, retail-based payment methods that originate at the retail point of sale through a cash transaction allow players to use a voucher code to fund online wallets. Additional innovations include the ability for iLottery wins to be cashed at the retail point of sale.
“These are a few examples of ways in which the top-performing iLottery programs in the U.S. continue to create opportunities to improve the player experience, which requires a high degree of connectivity between the retail and online experiences.”
Regulated sports betting has rapidly overtaken iLottery as a presence in the U.S. over the past three years. Thirty-three states plus the District of Columbia now offer sports wagering – 26 more than those that offer full iLottery solutions.
As sports betting and iGaming continue to spread across the U.S., it sparks new interest in the need for lotteries to adapt to the modern distribution channel that iLottery affords.
“The current gaming landscape in the U.S. is creating a lot more conversation in terms of how each state will introduce new offerings ranging from iGaming to sports betting and iLottery,” Siver says.
“There are a few truths that have quickly emerged. First, there is a market, audience and revenue potential for all verticals to coexist for the benefit of each state and to provide safe, regulated forms of gaming for its citizens.
“Additionally, as quickly as new forms of gaming have been adopted and sales are rolling in from sports betting, stakeholders are evaluating the revenue generation from each vertical.”
Siver highlights that while sports betting rakes in attractive topline sales figures, the highest margins belong to state-run iLottery programs that directly fund good causes.
All of NeoPollard’s U.S. iLottery partners, for example, use such income to fund education, and many iLottery programs are now contributing more than 20% of the lottery’s total return to the state, proving that significant incremental revenue is generated for state programs through iLottery.
“The significant revenue contributions are advancing the focus on iLottery,” Siver says. “This focus is also complemented by ongoing stakeholder education about the secure technology solutions deployed by the industry’s leading providers.”
Specifically, Siver notes how there is now greater understanding about the vital solutions required to protect players, including age and ID verification, geolocation and robust responsible gaming tools – all of which can be driven by iLottery solutions.
By offering a variety of products that engage new players and also enhance the experience for existing customers – all backed up by essential player protection tools – it appears inevitable that iLottery is becoming impossible for proactive state-run operations to overlook any longer.
Liz Siver joined NPi nearly four years ago from Microsoft, where she led teams delivering technology solutions and services to commercial and state and local government customers across the U.S. As General Manager of NPi, the iLottery joint venture between NeoGames and Pollard Banknote, she has helped the company expand its solutions to state lotteries in Michigan, New Hampshire, North Carolina, Virginia and Alberta, Canada. In the process, she has transformed NeoPollard into the leading North American iLottery supplier.