Market Insights
KTO Case Study: How PagSeguro helped KTO improve conversion rates
Check out the success case behind KTO’s and PagSeguro’s partnership, the importance of strategic payment processes for the segment, and more.
KTO Case Study: How PagSeguro helped KTO improve conversion rates
Mariana González Senior Marketing Analyst – PagSeguro Mariana González

Founded in 2018, KTO is a leading iGaming company providing a diverse collection of online gambling services, ranging from sports betting to casino games. Operating in Brazil since 2019, it quickly became one of the main iGaming operators in the country. Based in the Southern region, KTO’s presence is gradually becoming nationwide, pushed by a sense of reliability and trust that sets them apart from competitors.

For KTO’s Head of Operations Sean Telford, these distinguishing factors stem from the company’s founder, Andreas Bardun, and the management team’s extensive experience in regulated betting markets. With Brazil in the process of regulating and KTO’s prospects to increase their market share in the country even further, they needed a local payment solution aligned with their needs and their values. They found that with PagSeguro, who has been processing Pix payments and payouts for the betting company since November 2023.

“In the gambling industry, payments are historically the second biggest cost after marketing spend”, explains Sean. Since the license to operate in the soon-to-be-regulated Brazilian betting market is expected to cost around R$ 30 million, KTO has strategically aimed to conserve the required funds before obtaining the license, allowing for the optimisation of resources in other areas. Sean adds:

“By leveraging PagSeguro's services, we were able to effectively reduce our payment processing costs, allowing us to allocate these savings to other critical areas of our business.”
Thus, the partnership with PagSeguro was born – a major breakthrough for the payments company, which is just starting to break into the Brazilian iGaming scenario after leading payment processing for online gaming companies in Latin America for two decades.

During a visit to São Paulo, Sean stopped by our headquarters for a chat about the short but already highly successful story of KTO’s and PagSeguro’s partnership, KTO’s ambitious plans and views for the Brazilian betting market, the importance of strategic payment processes for the segment, and much more. Keep reading to check out the full case study:

KTO March 24 05articleKTO's Head of Operations Sean Telford stopped by PagSeguro's headquarters for a chat with our Global Business Director Renato Lahud

Trust and reliability pushing KTO’s success in Brazil

The gambling operator’s history of success in Brazil began in 2019 in the South of the country, where it did not take KTO long to establish itself as a market leader – with the ultimate goal of achieving a major brand presence across the whole of Brazil. “We’re known as the brand from the South but, in the last five years, we’ve grown exponentially and got a lot of national brand recognition now”, highlights Sean, mentioning that since operating in Brazil, they’ve grown by about 1300%.

Sean – who is a sports enthusiast himself – has been working in the iGaming industry for over a decade, with deep expertise in regulated markets such as Sweden, Denmark, Malta, Canada, and the United Kingdom. Brazil, which he sees as currently being “a slight gray area”, already has some regulation for the segment, and is in the process of becoming fully regulated by late 2024 or early 2025.

Leading all of the operational teams at KTO – including Customer Support, Risk, Payments, Anti-Money Laundering and also the company’s payment products –, Sean considers KTO’s strong reputation of being trustworthy as one of its main strengths: “We see ourselves as similar to a payment institution or an insurance company – when players are entitled to their money, they get their money. The trust factor is high with KTO, and that’s our major strength in terms of positioning”. He attributes this primarily to KTO’s origins, stating that “as we are founded and led by a management team that has experience in regulated markets, we take the principles of player protection exceptionally seriously, on both our platform and in our marketing approach”.

KTO's reputation for prompt and reliable payouts to their customers for their winning bets is undeniably a cornerstone of successful iGaming services, setting them apart from the competition. “We allow customers to withdraw whenever they want. In Brazil, many brands only allow their users to withdraw once per day or with a 24-hour withdrawal limit, so this is a big differentiator between us and other brands”, highlights the Head of Operations. “KTO is seen as a brand that can be trusted, and this has been earned over many years of treating our customers according to our core values of integrity, care and empathy.”

So much so that, in May 2023, KTO was one of the betting operators to help create the Brazilian Institute of Responsible Gaming (IBJR), intending to build a secure, trustworthy environment for customers and a sustainable operating market for gambling operators. At the occasion, KTO’s founder and CEO Andreas Bardun declared: “It is an honor for the KTO Group to be a founding partner of IBJR alongside many of the world’s leading iGaming brands”, and emphasized that the company is “fully committed to developing a more sustainable and regulated future for the betting sector in Brazil”.

Looking for a strategic local payment partner

Pushed by the need to reduce payment costs while still maintaining the speed and efficiency the company needs when receiving and sending payments, KTO began searching for a provider in Brazil, capable of handling business needs with the scale to support its exponential growth.

“Our main challenge was: how could we scale whilst reducing costs at the same time?”, reminds Sean. “Another challenge we encountered was scalability – we needed to partner with a provider that could seamlessly handle our scale. PagSeguro’s infrastructure is well-equipped to process the high volume of payments associated with our operations. This scalability assurance provided us with the peace of mind that our payment processing needs would be met without impacting our users”.

It was PagSeguro’s strong positioning in the market which caught Sean’s attention:

"You’re a huge company, and we need bigger partners now than we did four or five years ago. Our volume has grown substantially – a lot of companies don’t have the tech stack that allows them to work with this level of volume. Because of who we know you process for already, we knew you could process the volume that we have and that when we grow, you can grow with us. PagSeguro’s trusted all over Latin America, especially here in Brazil, so it was kind of a natural choice to help us grow. We have used other payment processors before, but we didn’t think they could grow with us – or help us grow at the same rate that we have been growing for the last four or five years."

Alignment with KTO’s views and reliability concerning regulated operations was also a must, adds the Head of Operations. “Considering the evolving regulatory landscape in Brazil, it was crucial for us to partner with a company that operates within a regulated environment and has a proven track record of compliance in the country. PagSeguro's experience and adherence to regulations provided us with the confidence and assurance we were seeking”.

Furthermore, PagSeguro also showed up as a key partner when it comes to marketing and campaign opportunities. “Our expansion strategy heavily relies on effective marketing avenues to explore more of the Brazilian market”, points out Sean, adding:

With its extensive reach and access to diverse marketing opportunities, PagSeguro emerged as a strategic partner capable of facilitating our growth initiatives – and its widespread recognition as a trusted brand in Brazil significantly contributes to building customer confidence."

With trust being a particularly sensitive and important topic for the gambling market, Sean highlights that “having a partner with a well-established reputation is a crucial factor that weighed in favor of PagSeguro”. He also considers it indispensable to have a strong local partner who deeply understands the Brazilian market – an aspect in which PagSeguro also stood apart, with its 20 years of experience, status of licensed acquirers in Brazil, and direct connection to the country’s banking system.

Faster payouts and 1% higher acceptance rates with PagSeguro

Reducing payment costs whilst maintaining fast, sustainable growth and efficiency was the main goal upon hiring PagSeguro’s solutions, and that happened fast. “By leveraging PagSeguro's services, we were able to effectively reduce our payment processing costs, allowing us to allocate these savings to other critical areas of our business”, says Sean.

KTO was already enjoying rapid growth, especially after implementing Pix in its Brazil operations. “We started processing with Pix in Janury 2021 – we were probably one of the first iGaming operators to do so, actually”, highlights Sean. “It was an overnight game changer, and it allowed us to gain market share. Before Pix came along, players would generally deposit on a Thursday or Friday to bet on the weekend. Now, payments are instant – and in this industry, speed is everything”, he reinforces.

Today, PagSeguro processes Pix payments and payouts for KTO, a solution that we are able to offer with no intermediaries and with 24/7 availability due to our direct connection to Brazil’s Central Bank. 

KTO’s main expectations upon starting to process with PagSeguro was to improve acceptance rates – “which we did by around 1 to 1,5%”, points out Sean. “It doesn’t sound like a lot, but when you’re talking millions of dollars per month, that 1% makes a significant difference”, he adds. “The other major point for us as gambling operators was payout speed – it’s the main metric that customers measure you by, how fast you pay your customers”.

Thus, after just ten days of testing out the new partner – during which we handled minimal amounts of KTO’s operations –, PagSeguro started to process 85% of the betting company’s volume. “Over those ten days, we’d just seen that the tech stack was able to handle it. Our payout times improved – and it’s very important to the gambling industry that your payout is super, super quick. It’s a big differentiator between us and other operators; and our acceptance rate increased by around 1%, as I’ve mentioned before, and that makes all the difference to our bottom line”, details Sean.

The partnership showed promising signs even before going live – even if, as Sean points out, finalizing the contract took some time. “We wanted to transfer a significant amount of volume to PagSeguro, so we needed to ensure that they could process the volume”, he explains:

A lot of people in this industry over-promise and under-deliver, but PagSeguro promised exactly what they ended up delivering. Our main expectations were improved payout times, instant deposits, and the ability to adapt – this is a new vertical for Pagseguro, so we knew you guys would take some time to adapt to the business model that we run. In terms of managing volume and the stability of their tech stack, we’ve been impressed."

In the end, the negotiation period was important to start the partnership strong and with a sense of trust already built between both companies. “There was a mutual understanding of each other's needs, so that time laid a strong foundation for a mutually beneficial and enduring relationship between our organizations”, Sean says. “The open lines of communication allowed us to navigate the complexities of the negotiation process with transparency and clarity. It was evident that both parties were committed to fostering a partnership that would be beneficial for all involved.”

Afterward, the integration process went fast and smoothly, with integration specialists from KTO and PagSeguro collaborating closely on it. Sean describes the task as a “very, very seamless experience – integrating took us around three weeks, which is generally quite quick. Testing went to plan and we were able to test PagSeguro’s platform before going live”.

With KTO adapting to a regulated Brazilian market, and PagSeguro shifting its focus to the iGaming segment, the two businesses have been working closely together to build the local payment solution KTO needs. “If there are any issues they are rectified quickly, and the team is always available to us”, says Sean. Volume, speed of processing and scalability are major factors for the betting business, and he considers the partnership successful in that sense.

Making the most of the high-rise Brazilian gambling market

Sean believes that heavily investing in compliance and adaptability to Brazil’s upcoming betting regulation was a pivotal moment for KTO: ”Our expectations are to grow significantly over the next couple of years – with the confidence that our partnership with PagSeguro will contribute significantly to this expansion”, he says. For the executive, market regulation is “a significant step in the right direction, and a development that we've eagerly awaited for many years”.

Looking ahead, Sean expects a collaborative approach with PagSeguro in matters related to compliance and Anti-Money Laundering, helping to ensure KTO remains fully compliant with the emerging regulations in Brazil – and supporting the company’s growth from here on out:

“PagSeguro already processes a significant portion of all of our volume, and I think that will grow over time as the relationship matures. We can definitely both grow together going forward – our expectations for the future of the partnership are optimistic and aligned with the evolving landscape of payments and regulations in Brazil."

With Brazil’s iGaming industry rising by 49% per year – the fastest growth rate in Latin America – and expected to reach US$ 22 billion in sales by 2026, the country will remain KTO’s main focus in the region. Sean expects regulation to make the market even more competitive: “It’s going to be interesting – there’s a lot of operators currently active that maybe won’t, because of the cost of the license going forward”, he points out. “Peru is currently also regulating, Chile may potentially regulate, and there are some regulatory changes coming in Colombia and Mexico. So, in general, Latin America and the Latin American gambling spaces are going to grow significantly over the next couple of years”.

To succeed in Brazil, understanding the market and its customers is essential. “Brazil has countries within a single country”, stresses Sean, “with distinct player preferences and behaviors across various states and regions. What appeals to customers in the South of Brazil does not have appeal to customers in São Paulo or in the North. Understanding and adapting to this diversity is crucial – being hyperlocal is key to our growth and vision as a company”.

With a monthly growth rate already rising by 1% solely from the volume processed with PagSeguro, coupled with the upcoming market regulations, KTO's distinct advantages certainly point to a bright future – and plenty of room to grow – for the iGaming operator in Brazil.

You can also watch the video version of KTO & PagSeguro's success case by clicking below:

To boost your business in Brazil with the support of an expert local payments solution, click below to get in touch with our team and understand exactly how we can help your company:

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