Josephine Watson discusses the results of the inaugural iGaming Business Futures Survey to better understand the industry’s sentiment towards innovation and disruptive technology
It’s fair to say that across industries, innovation, disruptive technologies and the hype that ensues are a blessing and a curse. On the one hand, industries are shifting to think less about the past and more about how to operate in the future, keeping pace with evolving customer demands and trends.
As a result, innovation has become a buzzword. Even the smallest of adjustments and adaptations are now labelled as game-changing and revolutionary, and the igaming industry is no stranger to this.
The white noise around innovation can result in technologies being put on a pedestal before we have any clear idea on their use cases or even their feasibility.
In response to this, iGaming Business launched a new survey to explore the industry’s sentiment towards new technologies and innovation.
Our research in the build-up to launching the survey highlighted five disruptive technologies as points of interest for the gambling industry: blockchain, internet of things (IoT), virtual or alternative reality (VR/AR), artificial intelligence/machine learning (AI/ML) and edge computing.
AI all the way
As AI/ML has so many potential use cases, we split out response options into three categories: AI/ML for strategic automation, for personalisation and for responsible gambling.
Respondents overwhelmingly (62.26%) chose AI/ML for personalisation as the most immediately transformative technology for the igaming industry, highlighting its ability to provide much-needed intelligence around customers’ journeys and minimise the paradox of choice in the face of frequent product launches.
Personalisation, as noted by one respondent, is the low-hanging fruit of AI use cases, and when compared to the other options, respondents noted that personalisation will have an instant impact on business metrics, and that the technology is already being leveraged by some suppliers to this effect.
Second in the running was AI/ML for strategic automation, with 51.89% of respondents backing the use case, followed closely by AI/ML for responsible gambling (RG) at 47.17%.
Both of these use cases tackle high-impact areas in the gambling industry such as security, fraud identification and compliance, operating more efficiently and effectively than human resources can. As several respondents noted, regulators are becoming progressively wiser to these issues and consequently are stricter in their legislation, and AI for automation and RG could significantly improve operators’ responses to these challenges.
Despite the enthusiasm for the technology, valid concerns were raised regarding the control and monitoring of AI. Current AI applications, classified generally as artificial narrow intelligence (ANI), have limited capabilities focusing on single tasks and purposes and operating solely within the parameters set by its programming.
While this does mean we won’t see the apocalyptic, HAL 9000-esque AI takeover, as ANI lacks the consciousness and drive of natural human intelligence, the technology can still fail in surprising and unpredictable ways if not carefully monitored.
Take the now infamous case of Microsoft’s experimental Twitter AI persona, Tay. In 2016, Twitter trolls relentlessly spammed the account with slurs, and less than 24 hours later, Tay was shut down for parroting them.
Granted, it wasn’t hard to break her – all you had to do was tell her to repeat you and she would – but as this loophole wasn’t factored into her programming, it was able to be manipulated. Now imagine a personalisation AI application not properly taught about the boundaries necessary to prevent problem gambling, and the igaming industry faces a whole new challenge.
However, we haven’t yet achieved the breakthrough necessary for artificial general intelligence (defined as human-level) or artificial super intelligence (surpassing human capabilities).
During his keynote speech at the Digital Transformation EXPO earlier this year, Stuart Russell, referred to as the “Godfather of AI” for his academic writings on the technology, warned listeners that this could happen at any time, unlocking a new realm of possibilities and challenges.
Of AI with human-level intelligence, he says, “This is not impossible, but we can’t predict with certainty when it will arrive, and should be prepared.”
It appears that now is the time for the industry to grapple with how it will use AI, striving to implement best practices ahead of the time when the technology will have intellectual capabilities equalling our own.
To blockchain or not to blockchain
While chosen as the most immediately transformative technology for the igaming industry by 33.96% of respondents, it seems the jury is still out on the actual use cases for blockchain.
Independent banking, blockchain for audit and blockchain-based sports betting were all cited as opportunities for the industry, and yet 50.94% of survey participants felt that the industry lacks understanding of blockchain and how it can be applied to their business.
Headlines and hype continue to feature blockchain as the next big thing, but in addition to the knowledge gap about the technology’s uses, respondents felt that controversies surrounding ICOs, fears over the impact of 5G networks and stunted commercial uptake will halt development.
As one respondent put it: “People are evenly split between those that massively advocate it, and those that disregard it entirely. It won’t change the industry but there will be some practical applications. Right now, there’s too wide a gap between the supporters and detractors to work out what these are.”
Despite these concerns, the general sentiment was that in the longer term, blockchain will be an industry standard.
Virtual reality or virtually redundant?
There was a time that VR/AR was the talk of the town, but that time seems to have long since passed. While a respectable 28.30% of respondents saw the technology as immediately transformative for the industry, the general consensus was a collective shrug and a mumble.
Poor uptake of the technology currently available has put the real demand for VR/AR experiences into question. While some respondents noted that customer experiences could be improved with VR/AR, another called it “gimmicky for the time being”, with naysayers sensing that the industry has a general lack of understanding of how younger players treat the technology.
However, there may be hope for it yet. High-quality VR/AR devices come with an equally high price tag, but once the technology is widely available and hitting the right audiences, respondents felt there would be an opportunity to reintroduce the idea to the industry.
Another tech bites the dust
Trailing behind the other technologies across the board were edge computing and IoT.
Many respondents admitted to a lack of understanding of these technologies, or at least about their application to the industry. Those who did feel they understood noted education and exploration as essential when looking to integrate edge computing and IoT to the industry.
In macro terms, IoT enables devices to communicate and connect with one another in a more intelligent way, exchanging data simultaneously. With some lofty forecasts, such as Business Insider’s estimation that there will be over 64 billion IoT devices by 2025, it’s certainly not something to ignore.
For the gambling industry, IoT has the potential to open up a variety of new devices to play on, as well as delivering even greater volumes of valuable data from these connected devices. Additionally, for brick and mortar casinos, IoT offers enhanced security solutions.
Edge computing, on the other hand, can offer further improvements for real-time analytics, completing the required analytical computing processes closer to the point of data collection, and thus reducing latency.
By and large, the sentiment was that both edge computing and IoT will hold relevance for the industry in years to come, but first there must be significant investment into developing technology stacks, starting with AI.
IoT in particular, as noted by respondents, is quite dependent on AI, and the infrastructure necessary to support a true IoT offering is a massive undertaking.
One respondent noted that their company was actively investigating the technology, however, saying: “We are in growth mode and looking to leverage the internet of things to expose our brand to as much of our target audience as possible.”
An example of how these technologies could work in tandem for igaming would be the National Hockey League’s (NHL) Puck and Player Tracking system. Currently, coaches use tablets to analyse data collected by antennas on the rink in real-time, but the NHL plans to add sensors to the puck, sticks and uniforms of players during the 2019-20 season. This will allow them to capture real-time data, creating an IoT network with edge computing capabilities. Clearly, the applications for this combination are significant, from augmented live stream display to daily fantasy.
Once IoT and AI are working in tandem for operators, respondents felt that edge computing will be more necessary, but again, the technology will need significant infrastructural support.
Innovation: who you gonna call?
Having explored these technologies, we wanted to gauge where our respondents felt the next wave of innovation would come from: accelerators/incubation schemes, industry incumbents, start-ups or industry outsiders?
While the majority (37.74%) felt industry outsiders such as Amazon, Microsoft and Google would be the main drivers for innovation, respondents noted that this would not be as a result of the tech companies actively inserting themselves into igaming. One said: “As we saw with Apple changing its App Store requirements, changes by the tech giants forced the industry to innovate and improve. This could ultimately encourage operators to better engage with these companies.”
Indeed, as others acknowledged, these companies typically keep at arm’s length with the gambling industry to avoid reputational damage, and one respondent felt this creates a vacuum of opportunity for incumbents to snap up promising start-ups.
Along that vein, 30.19% felt start-ups were the next best bet for innovation, as they are granted the agility and flexibility necessary to respond to new challenges and demands. With fierce competition in the start-up space, pricing for their technology is often more competitive and they have a greater need to find ground, respondents noted.
Thus, operators can take advantage of this to better meet market needs, while keeping their focus on their core business functions. And if the fact that some 87% of respondents said they wanted to hear more about start-ups in the industry is anything to go by, then start-ups are the ones to watch.
Regulation – help or hindrance?
The role of regulation in innovation talks is an area of interest and contention, with 66.04% of respondents saying current regulation hinders innovation in the industry.
The 27.36% who felt it helped took a big-picture approach to the issue, noting that the solid framework provided by regulators inspire innovation, as operators must solve issues within permitted guidelines, and that thinking of regulators as a hindrance only serves to create mistrust in the industry.
On the flip side, respondents felt that unfriendly tax rates and constrained cash flows dry up experimentation and halt growth. Some said it was less about the regulations themselves, but the attitude with which they are approached that hinders innovation, as the focus is so often on threats – often retroactively – and not on opportunities.
The smallest percentage was those that felt regulation both helped and hindered. Some felt that regulation restricts innovation from the player experience but drives innovation in areas of compliance (KYC, AML, SoW, etc), while others felt it just created a different kind of innovation that is subject to restrictions.
We then moved on to question how involved regulators should be in driving innovation, with the vast majority of respondents feeling regulators have a responsibility to both monitor and encourage the development of new technologies in igaming.
While some felt this responsibility lay solely with the operators and suppliers, and that public pressure and investors should drive this, others said that without a central body to govern innovation, only the bare minimum will be achieved.
As many of these technologies can be used to respond more effectively to regulations, respondents felt regulators should more actively pursue these technologies. Additionally, engaging with these technologies from the highest level could help to avoid oversights (such as the potential of bad AI applications) and create a transparent, comfortable environment in which the risks can be discussed and assessed.
Others went as far as suggesting it formed a key part of regulators’ responsibilities to the industry, citing the Malta Gaming Authorities’ blockchain sandbox or the Isle of Man Blockchain Office as prime examples of how this can serve to progress and protect gambling companies.
Another segment of respondents saw the regulators’ role as one of observation; monitoring and developing an understanding of these technologies so as to assess the risk, but taking a back seat when it comes to encouraging them.
Despite many feeling that regulators have a role to play in driving innovation, overall there seems to be a hesitance for how this ultimately should play out.
Looking to the future, there is a lot the industry can do to ensure innovation is more than just a hot topic. Taking proactive steps to engage and collaborate with start-ups, tech giants and, of course, other operators, will doubtless form a large part of innovation strategies, as seen in other industries.
While mergers and acquisitions or joint ventures were historically the approach for this, they don’t typically happen with the agility and flexibility required to keep pace with innovation.
Research conducted on disruption by the Economic Intelligence Unit and supported by EY showed that nearly a third of organisations across industries have formed a strategic alliance with a company in their industry, and a quarter with a company from a different industry.
Whether the industry takes this approach, or opts to work with regulators more closely, or even chooses to sit back and allow others to do the innovating for them, the promise of new technologies disrupting the way operators work seems set to be true.