A Credit Card Ban – How Will It Impact Online Gambling?

Posted by Harry Kane on Thursday, May 17, 2018

While the size of the virtual gambling market in the UK is well-known, far less focus is given to the amount that individual punters wager in a regular basis.

In fact, British gamblers spend an estimated £3 billion on virtual slots and online casino games every single year, while new accounts are being opened with operators across the length and breadth of the UK.

With this in mind, it’s little wonder that the UK Gambling Commission (UKGC) is looking to impose more stringent regulations on the amount that customers spend online. Similarly, the regulator has proposed a ban on the use of credit cards, in a bid to prevent players from spending more than they can realistically afford.

But how will such a ban impact on the market, and will it prove to be an effective way of driving responsible gambling? Let’s take a look:

Exploring the Issue – Credit Card Usage Online

The excessive use of credit cards represents a considerable economic and social issue in the UK, and one that transcends individual industries and marketplaces.

Arguably, the problem is also worsening amid rising inflation and falling disposable income rates, with credit card borrowing in the UK increasing by 10% at the beginning of 2018.

In terms of online gambling, a study commissioned by the government’s Digital, Culture, Media and Sport (DCMS) department found that credit card use funded between 10% and 20% of all activity on the virtual market.

When you also consider that the online gambling industry achieved a gross gaming yield (GGY) of £4.7 billion in the year ending March 2017, there is a concern among regulators that the markets’ relentless growth is being at least partially driven by credit and irresponsible spending habits.

The Credit Card Ban – Why Is It Being Proposed?

The current state of affairs simply cannot be tolerated by the UKGC, who have placed a huge emphasis on safeguarding vulnerable gamblers while creating a safer and more transparent marketplace for all participants.

In fact, the protection of vulnerable players and consumer interests is one the UK regulator’s core, strategic priorities through 2021, as it looks to tackle problem gambling and ultimately enhance the reputation of the industry as a whole.

In this respect, the credit card ban is being proposed as a way of preventing vulnerable players from gambling with capital that they simply do not have. As a result of this, online players will find it far more difficult to wager more than they can realistically afford, while operators will be able to take practical steps towards protecting their individual customers and cultivating a greater sense of trust within the marketplace.

Such a move is at odds with the nature of technological advancement, of course, which has created a wider range of online payment methods for players in the digital age. From the use of credit cards and e-wallet solutions to cryptocurrencies, these solutions have revolutionised the market and enabled operators to deliver a more flexible service to virtual gamblers.

This evolution has undermined the regulation of online payments, however, while actively enabling players to leverage credit as a way of funding their activity.

By banning credit cards completely, customers will be largely restricted to accounts that hold physical sums of cash, as they look to place wagers either using a debit card or an adequately funded e-wallet provider such as PayPal. So, although this could create some obstacles when it comes to executing convenient, real-time transactions, it will also compel vulnerable players to gamble in a more responsible and thoughtful manner.

Does This Ban Go Far Enough?

While we have yet to see whether the UKGC will actually implement a credit card ban, such a move would certainly represent a progressive step in the fight to safeguard vulnerable gamblers online.

Despite this, some would argue whether the ban goes far enough, particularly with other forms of credit accessible to players who are inclined to seek them out.

Take the prevalence of payday and short-term loans, for example, which also provide applicants with a relatively accessible (but high cost) source of temporary credit. Although the government moved to cap the interest rate associated with payday loans at just 0.8% per day back in 2015, sourcing this type of credit remains relatively easy while customers are still required to pay back far more than their initial borrowing.

At present, there is nothing to stop customers from applying for a payday or similar short-term loan and having this paid directly into their bank account. From here, it would be possible for players to transfer the loaned funds into their online gambling account, before using this to place bets and wager without restriction.

This underlines just how deep the credit issue runs, even if there are no precise figures on how many gamblers currently fund their activities using borrowed cash. With this in mind, it may be argued than banning the use of credit cards may not be as effective as it initially seems, while it may also encourage problem gamblers to utilise short-term loans to continue playing online.

The Last Word

Ultimately, the challenge facing the UKGC is a significant one, with the ultimate goal being to eradicate problem gambling and encourage more responsible behaviour from players across the board.

This is a long-term objective, however, and one that cannot be achieved overnight. As a result, the UK regulator must take small but actionable steps towards safeguarding players, while striving to minimise the use of credit wherever it can.

Given this, and the fact that credit cards currently account for up to 20% of all online gambling transactions, a proposed ban on this payment method makes perfect sense. It is also a signal of intent from the UKGC, as it looks to deliver on its strategic objectives over the course of the next three years.