The Gambling Commission’s (GC) call for evidence from operators on proposals that “strengthen” the expectations on businesses to assess whether the gambling of players is affordable within thresholds set by the regulator has caused operators to sit up and take note.
The consultation raises a lot of questions about how operators are actively monitoring and managing the affordability risk of their customers, and how this can be improved on, when the availability and accuracy of data available to operators remains limited.
Operators simply don’t currently have access to financial data, and even if it were to become available there is no clear blueprint for what operators should do with it – each operator has different policies, systems and skillsets that won’t necessarily align with blanket requirements and regulations.
Below, I discuss some of the key questions raised by the Gambling Commission’s proposed requirements, what they might mean for operators and how they can prepare themselves for any likely changes to ensure minimal disruption to players and to their wider business.
How will the Commission will set its affordability threshold?
The Office for National Statistics indicates that average weekly gross earnings for people in the UK is £580 and I would expect the regulator to base its thresholds on this figure. That being said, the GC has indicated the threshold will be applied to losses and not deposits.
This may change throughout the consolation period and in any update to regulations, and I would suggest that operators prepare to carry out some affordability checks on registration as inevitably this is the way I believe it will go. Of course, they must also prepare to carry out checks on losses, too.
While the Gambling Commission has not indicated this at present, I do wonder whether we will see different requirements and thresholds applied to the different licence types. This will likely hit casino operators the hardest, but we do have to consider the difference in the speed of loss.
It is interesting to note, however, that in the regulator’s recent enforcement report it said that customers wishing to “spend more” than the national average should be asked to provide additional information such as three months’ payslips, tax returns and bank statements.
This, the GC said, would “both inform the affordability level of the customer may believe appropriate with objective evidence whilst enabling the licensee to have better insight into the source of those funds and whether they are legitimate or not.”
But now that the regulator is calling for evidence to impose thresholds and checks on losses, it seems to be in direct contradiction of the report and feels like the conversation is being had after the horse has already bolted.
What affordability checks operators will have to carry out?
The regulator will likely require operators to carry out different affordability checks at different loss or deposit thresholds. Checks should be scalable and tailored to the individual player and take a layered approach to affordability.
This means starting with the basic checks for low loss/small deposit players and then scaling up checks in line with the increased risk. For example, carrying out enhanced due diligence (EDD) with some customer questions at sign up and getting income evidence upon first deposit.
Operators will still have to collect player data, but questions remain unanswered around whether unverified data will be sufficient to attribute a risk rating to customers. I would hope publicly available unverified data is permissible, but it can be prone to error.
This means it should only be used to assess relative risk which then builds into more formal requests for verified documentation. I believe that verified data and documentation will become prerequisites and that operators will be expected to evidence this.
What impact will these changes have?
Any changes to affordability checks will cause friction in the customer journey; requesting source of funds and affordability documents from a player is a tough conversation to have. But if all operators are bound by the same requirements the conversation becomes easier.
Sentiment is changing, too; players know they are going to be asked for these sorts of documents and that the goal is to ensure they are properly protected. As a result, the number of complaints around losses will come down which should be seen as a positive by all stakeholders.
What can operators do to prepare?
Operators should look to tighten controls and affordability checks now to ensure they are ahead of any regulatory changes that might come into force. If not, they should have customer journey changes built into their product roadmaps so they can be seamlessly implemented.
Other things to consider – affordability checks should not be taken in isolation and must form part of the overall player risk profile. To help facilitate this, operators should look to further automate processes and implement real time frameworks if they are not already in place.
Player communication will be vital, too. This includes messaging around why these additional checks are required, and the documents players will need to provide in order for affordability checks – whether on losses or deposits – to be carried out.
Changes are undoubtedly coming, and operators would be wise to prepare as best they can to ensure they can check player affordability whether it be on deposits or losses. They really can’t afford not to.
Paul Foster is managing director of Crucial Compliance, which looks to help operators develop responsible and sustainable businesses by providing regulatory, corporate responsibility, compliance and professional services.