Winning Post: UK gambling faces its inevitable credit clean-up

Industry strategic consultancy Regulus Partners starts of the week by looking at the ban on credit cards for betting activity, and further additions to the safer gambling agenda in the UK.

UK: regulation – taking credit?

Gambling with credit cards, or through wallets funded directly from credit cards, will be banned in GB from April 2020. The consultation responses largely seem to have been prepared to accept the inevitable, while the major e-wallet providers suggested that policing credit card activity into gambling would not be a problem and would only require c. two months of development: they have therefore been given three.

In an environment where public (press/political) trust in gambling operators in the UK keeps plumbing new lows, this outcome was perhaps inevitable. We consider whether it was justified, what the impact will be and what the implications are for the forthcoming wider legislative review.

In terms of the effectiveness of a credit card ban from a consumer protection standpoint, this would have a high degree of prima facie validity: gambling with (expensive) borrowed money does not seem a good idea on a common-sense level and such behaviour could (if repeated or along with other factors) point to harm. More specifically, the evidence presented by the Gambling Commission as part of the review would appear to indicate that the behaviour of those with a gambling disorder would be disrupted, while the level of inconvenience to more recreational players would be minimal – so far so good.

However, it is worth noting that the evidence provided for this is relatively thin and not transparent: an unpublished one-time online survey of 2,000 adults, only 150 of whom used a credit card to gamble online – of these 22% were classed as problem gamblers (certainly a sufficiently high number to recommend action in some form, but only 33 people on one survey). The move therefore passes the sniff test, is certainly in line with the zeitgeist and has broadly been accepted by operators with equanimity – but this may say more about politics and economic exposure than harm prevention.

GB licensees have seen this particular train coming for c. two years. There has been plenty of time to gather evidence, conduct simple A-B testing and take customer soundings. This would have allowed the Commission to take a view on something more scientifically robust than opinion, common sense, broad indicators and a single small sample survey. A broader and more scientifically robust evidence-base might also have led to a more nuanced – and potentially more effective – harm mitigation response than a ban. However, without such evidence (and engaged industry input), it is very difficult to form a nuanced view and a relatively complicated response, leading to regulators to reach for a ‘simple’ outcome. In this context the credit card ban has strong links to the B2 ban: a dearth of effective industry evidence and engagement (until it was far too late) led to a ‘simple’ solution that most affected operators considered unthinkable (again, until it was far too late).

Efficacy should also be considered in terms of the ability to evade. Undoubtedly some determined customers will be able to get around the ban by, for example, buying cryptocurrencies and exchanging them into wallet value; more prosaically some customers may choose to gamble excessively with their debit card while loading their credit card with grocery costs. However, few systems are perfect and the fact that they can be gamed does not mean that they are not broadly effective: the very fact that a customer needs to make such extra steps could be a powerful mitigator of harm. There is often a danger that (as with ‘channelling’ debate) an overwhelming focus on capturing the activities of the heaviest users (admittedly most of the revenue) can miss the basic wellbeing of the vast majority of users.

While there is no clear data, gambling on credit cards would seem to account for c. 5-15% of deposits in GB, with bigger / more mass market operators gravitating toward the lower end of the range (only c. 8% of gamblers use credit cards to fund at least some of their deposits, ranging from very infrequently to, more concerningly, much more frequent use from some ‘highly engaged’ gamblers). Credit card use through wallets will be a material but not significant incremental delta to this figure (especially for smaller / more VIP-focussed operators). This is meaningful, but given that other payment options are available, the overall impact on revenue is likely to be c. 3% or less, in our view (but with some operators hit harder than others – likely further accelerating organic consolidation and long-tail market exits). It is worth considering that while this scale of impact would have been mere ‘noise’ from a financial standpoint only two years ago, it is roughly 50% of sector growth now – and therefore represents a meaningful headwind in terms of YoY delta.

How much of this reduction is a reduction in ‘bad money’ from those with gambling disorder vs. reduced trading from frustrated but perfectly in-control players is hard to say? This point begs important questions of evaluation: how the Commission, or other stakeholders, intend to assess the efficacy of the ban against the objective of harm mitigation is also not clear – but rather important, in our view. The horse might have bolted in terms of evidence to inform policy, but it certainly hasn’t in terms of evidence to assess impact: this should be crucial given the context of the broader review and a growing tendency to pick gambling issues off piecemeal (as well as a growing tendency of the industry to accept a beating, even when poorly informed).

The impact of the UK decision has already had a broader impact, likely contributing to Spanish legislators suggesting a similar ban in Spain. Here is it is worth considering that less mature markets, which tend to have higher concentrations of heavy users and (sometimes) more complex payments issues, can have a very different payments mix to the UK. Malta is a useful proxy here for European markets: in 2018 credit and debit cards together had fallen 10ppts to 30% deposits mix, while wallets (likely with a reasonable CC footprint) were relatively stable at 20%. What might be ‘acceptable’ political-regulatory adjustments for large UK-led operators might be far more disruptive for other markets. This puts an even greater premium on evidence-based decision-making and evaluation.

UK: In Parliament – “and they’re off”

There is nothing like getting the New Year off to a positive start; and in political terms, this has been nothing like a positive start to 2020 for Britain’s gambling operators.

The NHS England press office may have spent Christmas lobbing grenades (see below) but this was just a warm-up to the political fury that has greeted the industry in the first fortnight of the year – in response to online VIP programmes and the live streaming of sport on betting sites. The swift reopening of hostilities seems more likely to bring forward Government plans to review the Gambling Act (despite suggestions that ministers wanted to delay in deference to larger matters of state). The gambling minister, Helen Whately (Cons, Faversham and mid-Kent) has been required to put in some early practice with the Tom Watson maxim that Britain needs legislation “fit for the digital age”.

Mrs Whately’s article in the Daily Telegraph this week made the necessary noises about gambling harm but also suggested pragmatism and a desire for considered policy over political grandstanding. In an increasingly hysterical debate about the future of betting and gaming, the Department for Culture, Media and Sport (along with its Shadow department under former Labour Deputy Leader, Tom Watson) has often seemed like one of the last bastions of level-headedness and tolerance.

One of the week’s more significant events was the introduction of a Private Members Bill by the Bishop of St Albans “to require the coroner or jury at an inquest to record an opinion as to gambling addiction and any other relevant factors in a case of death by suicide; and for connected purposes.”

We are not familiar with the complex challenges that coroners face (and the sheer number of contributory factors that they must consider) but – on the face if it – the noble prelate’s request seems reasonable (particularly given that a similar proposal was included in Wardle et al.’s Harm Reporting Framework from 2018). It is relatively rare that Private Members Bills becomes law but regardless of what happens next, the bishop’s Bill seems likely to push matters in the right direction. Such a move would also materially assist with providing data to effectively address an extremely serious but also highly emotional subject.

The Bishop of St Albans has certainly had a busy start to the year, firing in a salvo of written Parliamentary Questions on “the gamblification of sport” (a rather inelegant phrase that seeks to describe the nature of commercial relationships between sports rights holders and betting companies). A further eight PQs (on lotteries, pool betting duty, problem gambling, sports and betting and the timing of the Gambling Act review) have been submitted in the Commons since the start of the year. Three of these were submitted by the new Shadow Culture Secretary (and former Coronation Street star), Tracy Brabin (Lab, Batley & Spen) who is starting to get to grips with the soap opera that is Britain’s gambling debate….

UK: Safer Gambling – Write On! Growing up is hard to do….

In olden times, the Royal Mail was entrusted with the delivery of letters in the UK; these days the trend appears to send important correspondence by national press. This week, the national mental health director of NHS England, Claire Murdoch wrote to senior executives at GVC, Flutter Entertainment, Betfred, bet365 and William Hill to express concern about the effects their businesses had on mental health.

Ms Murdoch called on the companies (and the wider industry) to ban credit card payments immediately (rather than wait for April’s change in the law); and consign VIP programmes and live streaming to history. Within her letter, she set out some valid concerns even if she felt the need to support them with the now habitual misrepresentations of official data (accurate diagnosis does not seem to be a necessary precursor to prescription). Further, her decision to transmit these concerns in an open letter (accompanied by a press release) shows just how low the level of debate has now sunk.

Brigid Simmonds of the Betting & Gaming Council (who was copied in on the correspondence) responded – also via the media (but at least had the defence of needing to respond publicly to public criticism). It all raised the question of whether this is really the best that we can do.

We do not know how many meetings Ms Murdoch has had with the industry but have been led to believe by some operators that attempts to engage have had a cold reception. As we have written before, those who are serious about harm prevention cannot afford to be morally squeamish about consorting with the industry if they wish to engineer effective change. Failure to do so will inevitably invite suspicion of hidden agendas and political/dogmatic motivation, while also significantly reducing the likelihood of being effective in both the diagnosis presented and the treatment offered.

We must hope that the executives of the gambling companies that Ms Murdoch wrote to will respond constructively, with dignity and in private; and that constructive engagement will soon take place. If we are to have a grown-up and well-informed debate on the future of regulated gambling, the vogue for taking stances by press release must come to an end.

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Content provided by Regulus Partners

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