iGaming Trends and Their Impact on the Market

Posted by Harry Kane on Wednesday, November 18, 2020

While the gambling industry in the UK experienced a slight contraction in the year ending September 2019, various iGaming segments actually saw significant growth. This included online bingo, which grew by a staggering 12.5% during the period and peaked at £198 million.

Given the growth within this space, it should come as no surprise that iGaming in the UK is also relatively volatile and evolving at a rapid pace.

Make no mistake; this marketplace is driven by a number of fluid and fast-changing trends. We’ll explore in the post below, while asking how these trends are impacting on the marketplace.

The Key iGaming Trends and Their Impact on the Market

Ultimately, the modern iGaming market is facing huge regulatory changes as it continues to scale, particularly with the 2005 Gaming Act largely unfit for purpose and the UK Gambling Commission (UKGC) having made the safeguarding of vulnerable players it core strategic objective through 2021.

The UK market has also long since reached maturity, both in terms of its size and the regulatory framework that underpins licensing. This has created additional challenges of its own, creating something of a perfect storm for operators to navigate in the digital age.

OK, we hear you ask, but what are the precise trends that are impacting on the iGaming market in the UK? Here’s a detailed overview, along with some explanation as to why these trends are so impactful.

The Introduction of New Operational Policies

Ever since the UKGC announced its core strategic objectives through 2021, we’ve seen a number of measures rolled out with the intention of safeguarding vulnerable and underage players.

The UK government has also begun to play an increasingly active role in supporting the UKGC and protecting problem gamblers, with the controversial FOBT cap likely to be followed by a similar crackdown in the iGaming marketplace.

The measures imposed by the UKGC have largely taken the form of revised and increasingly robust operational policies, which must be adhered to by both existing and new casino brands.

One such policy includes the compulsory use of GamblingAware, whose core mandate is to research and alert gamblers to the negative aspects of betting and offer them access to preventative measures going forward.

This is now a requirement of securing a license with the UKGC, which means that brands cannot operate legally in the UK market without complying with the measure.

Interestingly, the UK government is also likely to impose a similar measure compelling operators to sign-up to the national self-exclusion scheme (GAMSTOP), which has been designed to provide blanket protection to vulnerable gamblers and assist those who have recognised the initial signs of compulsive behaviour.

This is indicative of how regulators have sought to tighten the rules that govern the gambling industry, with a particular focus on holding operators to a far higher standard and ensuring that problem gamblers aren’t lost within a lucrative and fast-growing marketplace.

Another example is provided by the UKGC’s recent credit card ban, which effectively prohibits players from wagering using borrowed funds. According to a report conducted in 2018, more than 800,000 customers used credit cards to gamble regularly, accounting for nearly 20% of all deposits processed online.

Separate research carried out by the Commission itself found that 22% of these gamblers were classed as being vulnerable, creating a scenario where they may continue to wager beyond their means and amount significant levels of debt in the process.

From a trend perspective, it’s also apparent that the regulatory and operational measures being rolled out by the commission are becoming increasingly stringent.

This is borne out by the recent recommendations of the All-Party Parliamentary Group (APPG) for Gambling Related Harm, which includes prominent members such as former Conservative leader Iain Duncan-Smith.

Recent recommendations include a proposed £2 betting cap at online casinos, with this mirroring the terms of the aforementioned FOBT cap. Similarly, the group has suggested banning all gambling-related advertising, while reinforcing the notion that widespread license reviews (for both new and existing operators) should be central to revised gambling legislation in the UK.

If implemented, these measures could change everything from the existing 2005 Gambling Act to the respective turnover for individual brands, as the way in which companies operate continues to change at an increasingly noticeable and frenetic pace.

Rising Taxation for iGaming Brands

When the 2005 Gaming Act was introduced by Tony Blair’s Labour government, there was a clear focus on creating a progressive regulatory framework that would encourage industry growth and profitability.

This meant that taxation was capped at a relatively competitive level, including a 15% Remote Gaming Duty (RGD) levy for all brands operating in the UK.

As the market has grown and fully matured, however, the focus has switched towards protecting individual players and safeguarding the often fragile reputation of the iGaming industry. This has not only led to the various measures referenced above, but also created a scenario where the UK Treasury has sought to increase the tax burden placed on operators.

To this end, the rate of RGD payable by operators increased by 6% to 21% last year, with this charged directly to all profits garnered through online wagered placed by UK customers.

Of course, many argued that then Chancellor Philip Hammond was also keen on increasing the Treasury’s tax revenues in the wake of the FOBT cap, which slashed bookmakers’ offline profits by up to 56% and the amount payable in levies each financial year.

Still, this move was significant, partially because it was preceded by the Spanish government’s decision to cut its own gross gaming revenue tax from 25% to 20%.

Spain’s market is far less mature than the UKs’, while it’s also thought that the nation may be looking to compete for operators from Britain against the backdrop of Brexit.

To this end, the Spanish government has previously announced that the semi-autonomous enclave Ceuta was able to offer even more tax breaks to iGaming operators, including corporate income tax of just 12.5% and a VAT rate equivalent to just 0.5% (compared with 21% elsewhere in Spain and 20% in the UK).

These strategic tax cuts have undoubtedly provided a further boost for Spain’s iGaming sector, while undermining the UK’s at a potentially difficult time.

They’ve also highlighted the changing approach of regulators and government bodies in the UK, where increased tax rates are continuing to compress profit margins that have already been squeezed by previous regulatory measures such as the FOBT cap (for multi-channel brands) and the decision to eliminate credit card payments.

This clear trend for higher iGaming taxes in the UK is unlikely to change anytime soon, creating a scenario where UK brands may continue to review their options and operational base in the near-term.

The Rise of Innovation

Next up is arguably then most overt trend, which refers to the rise of innovation and the impact that technological advancement has had on the iGaming marketplace.

You’ll notice that innovation has impacted on almost every aspect of the iGaming space too, with the aforementioned GAMSTOP offering a relevant case in point.

Despite its initial issues in terms of processing and adequately safeguarding participating players, GAMSTOP represents a large-scale and interactive database of players, which features comprehensive datasets and is ultimately expected to include every single licensed iGaming operator in the UK.

In terms of accessibility, the relentless rise in mobile penetration in the UK has also influenced the market, with Ofcom revealing that 78% of all adults regularly used a smartphone by the end of 2018. To provide some context, the corresponding number in 2012 was just 39%, with this highlighting that mobile penetration levels had doubled in barely six years.

In 2018, the number of online gamblers who wagered regularly using a smartphone or tablet also broke the 50% barrier for the first time. In fact, 51% of players gambled frequently while on the move, while this number is likely to increase incrementally in the years to come.

In response to this, more than 90% of online casinos have now designed responsive websites for the purpose of smartphone and tablet accessibility, while many have also developed native apps for iOS and Android platforms. This has also coincided with the proliferation of HTML5 technology, which underpins games that can be accessed seamlessly across an array of available devices.

You can also currently access cheap Electronic Gambling Devices (EGDS), which are affordable, incredibly easy to run and simple to acquire. They tend to have in-built software and applications that replicates a corporeal gambling experience, and one that benefits from authentic pacing and high-quality graphics.

In this respect, the emergence of virtual and augmented reality also represents a game-changer in the iGaming marketplace, and one that arguably represents the final frontier for creating a realistic gambling experience online.

When combined with innovations such as live interactive dealers and the use of random number generators (RNGs) to create genuinely varied and unpredictable results, such innovations are creating a genuinely authentic iGaming market that’s both thrilling and satisfying in equal measure.

Over time, this has the potential to make land-based gambling moribund, particularly when you also consider the impact of the FOBT cap and the decision of multi-channel operators to focus their attention more exclusively online.

This trend is already beginning to take shape, with iGaming having now grown to account for more than 37% of the total gambling industry in the UK.

Bitcoin Gambling Continue to Enter the Mainstream

If you’re a regular online gambler, you may be aware that the number of so-called “Bitcoin” casinos are on the rise in the UK.

This includes operators that offer Bitcoin as one of many available payment options, along with others that only enable players to wager using the market-leading cryptocurrency.

There are numerous benefits to Bitcoin casinos, with anonymity arguably the single most prominent. After all, there remains a small social stigma associated with gambling, and in this respect, players may want to conceal their iGaming transactions (particularly when applying for a mortgage or another form of secured or unsecured credit).

The good news here is that Bitcoin can be used anonymously, primarily due to the fact that it’s not connected to any bank or credit card account. Instead, tokens are stored in a specialist Bitcoin wallet, which can often only be identified by an email address of your choosing.

Bitcoin is also underpinned by blockchain technology, which is completely decentralised and capable of maintaining an immutable (and not to mention comprehensive) record of transactions. As a result of this, you can rest assured that Blockchain is an incredibly secure and transparent payment method, and one that’s largely impervious to manipulation from a central authority.

Ultimately, casino operators are finally starting to realise the benefits that Bitcoin offers to players, as they look to leverage these to their own advantage. Of course, there are operational risks given the volatility of this cryptocurrency and its rapid changes in value, particularly as casinos are required to maintain a holding in Bitcoin in order to process withdrawals as and when required.

However, this is outweighed by the growing demand for Bitcoin and similar cryptocurrencies amongst online gamblers, as it enables companies to target a potentially new demographic of players who have a Bitcoin holding and want to potentially increase its value.