Citadel Commerce to Replace NETeller?

2007 March 29, Jonny Vincent

The online gambling industry has been desperately hoping that an online payment processor can move into the gap left by NETeller's withdrawal from the US and Canadian markets, and it now seems as if Citadel might be positioning itself to become the preferred payment processor for online gamblers.

The OnlineCasinos website published an interesting article speculating that Citadel Commerce might be about to make a play to become the primary online gambling transaction processor. The reason for this speculation is an announcement made by ESI Entertainment Systems (of which Citadel Commerce is a subsidiary) that it was relocating its intellectual property and primary data centre from Vancouver to Malta, a small island in the Mediterranean, which has become an important licensing centre for online gambling companies.

Citadel withdrew from the US market following the passing of the Unlawful Internet Gambling Enforcement Act and has been gradually restructuring its operations, reducing its North American marketing personnel, and adding staff to its call centre in Costa Rica and its operational and sales centre in the UK.

If the restructuring is a sign that Citadel plans to tap into the desperate demand for reliable and trusted online payment processors, it will be a move welcomed by the online gambling industry, which has seen profits crash as players face increasing difficulty in funding their accounts.

Shares in ESI Entertainment Systems (TSX: ESY) suffered along with the rest of the industry post-UIGEA, dropping to 35c on January 18 after opening at $2.95 on March 30, 2006. They are currently trading at 40c (at time of writing).

If the speculation that Citadel Commerce will make a play for the online gambling transaction market in the US from Malta turns out to be justified, the current price of 40c per share will look like a bargain in hindsight.