Open Banking and Affordability Checks – Is This Ethical?

Posted by Harry Kane on Friday, July 5, 2024

In the UK iGaming market, the government has recommended that affordability checks be introduced to ensure that players are compelled to wager within their means online. This was one of the key outcomes from the recent online gambling White Paper, which sought to review the state of the UK’s iGaming sector, and the responsibilities placed on operators.

After a period of consultation, a pilot scheme of so-called “frictionless” checks has now been announced and will be unveiled at the end of this month. This two-tier initiative will impose checks based on the level of loss on individual accounts, but concerns have been raised about how checks will be carried out and the underlying technology that will be used.

OK – So What is the Initiative?

This initiative will apply solely in the UK at the time of writing, while it has been widely suggested that the scheme will be phased in gradually over time and is liable to change. But are affordability checks ethical, and will they achieve the desired goal online? This is a question that operators and the regulator will have to address in the coming weeks and months.

The first stage of the scheme will launch on August 30th and will run for six months from this date. This has been partially constructed for the benefit of both players and operators, as the regulator looks to test the scope of potential checks and will allow a viable period of transition for all parties involved.

So, the initial phase will focus on so-called “invisible” checks on selected players: namely those who are losing £500 or more each month through gambling. This amount will drop to £150 from February 28th, 2025. At this stage, a much larger number of players may be subject to affordability checks.

The scheme will then transition into a second phase, which requires much closer scrutiny of players who incur losses of £1000 in 24 hours (or less) or £2000 in a period of 90 days or less. This will affect a much smaller number of players (between 2% and 3% of the total UK player base), but these individuals account for the majority of the spend on these shores.

The scheme will then be paused to allow for a period of analysis and reflection, before final affordability checks and procedures are confirmed. So, it’s almost impossible to determine precisely what such checks could look like in 2025, but betting brands must brace themselves for at least some changes in the near and longer-term.

Open Banking and the Tech Behind Affordability Checks – Is it Ethical?

Even before this scheme has been formally started, operators have been under pressure to comply with anti-money laundering and responsible gambling guidelines. This has compelled many to take a closer interest in their players’ spending, leveraging open banking technologies and third parties to collate the necessary data.

This has raised significant concerns among customers and consumer protection groups. Open banking allows individuals to share their personal financial data with identified and trusted third parties, in order to qualify for a particular offer without having to undergo a credit check. This is based entirely on the customer’s consent.

Open banking is particularly effective at gauging affordability and ensuring that a customer’s source of funds is legitimate. However, it requires each customer’s explicit consent, and there may have been instances where this either hasn’t been sourced or checks have proved more intrusive than expected.

Similarly, while open banking is promoted as an alternative to the direct provision of documents when verifying age and identity, it may be used coercively to carry out background checks that players have little knowledge or understanding of. This is another huge ethical concern, as it creates a scenario where even ‘frictionless’ checks are carried out without the knowledge of the subject in question.

Make no mistake: the technology behind open banking is relatively unknown, and although it requires consent, players aren’t always fully aware of precisely what they’re consenting to. If this proves to be true, affordability checks may be harmful to customers and could discourage them from wagering in the first place.

The Last Word – Can Affordability Checks by Ethical and Effective?

Regardless of whether personal financial information is sought through open banking protocols or direct input, bettors never like to share data. Some have also argued that open banking cannot be described as ‘frictionless’, creating a conundrum for brands who want to keep their customers happy.

This has always been a tough balancing act for operators to perform. After all, it’s important to safeguard vulnerable players who may be betting outside of their means. Similarly, operators must prevent underage players from betting online, but customers are also increasingly loathe to share personal data (financial or otherwise in the digital age).

Ultimately, it cannot be argued that targeted affordability checks make logical sense on a fundamental level. However, this intrusion must be proportionate and considered, while thresholds must be set in a way that distinguishes between moderate and excessive betting. Otherwise, the market could see players close their accounts and seek out less intrusive operators.

More specifically, this could drive players towards the burgeoning black market, so any such initiative needs to be considered and implemented cautiously. According to data, unlicensed black-market betting in the UK grew fourfold between 2021 and 2022, while sites that operate in this space offer more accessible bonuses and no verification procedures.

This will be an interesting space to watch in the future. However, it’s important that all responsible gambling measures are effective without turning players towards rogue sites and black-market operators.