The Key iGaming Trends for 2021

Posted by Harry Kane on Thursday, January 28, 2021

As we approach 2021, there’s no doubt that the iGaming industry in the UK remains in a state of flux. Despite continued growth across several verticals in the UK, increasingly stringent regulatory measures and geopolitical issues have the potential to hinder further expansion in the near-term.

These factors are contributing to a delicately balanced marketplace, and one that could endure significant peaks and troughs throughout 2021 and beyond.

In this post, we’ll appraise some of the key trends that will shape the iGaming market next year, while asking how these will impact on players and operators alike.

Brexit and the Threat to the UK Marketplace

After more than four years of posturing and wrangling, it appears as though the Brexit negotiations are inching closer towards a no-deal arrangement.

In fact, it’s now argued that France are pushing for a no-deal Brexit in the wake of the UK’s steadfast stance on fishing quotas, with this potentially making an amicable agreement almost impossible before the deadline of December 31st.

This could be noticeably damaging for the iGaming industry in the UK, particularly from the perspective of Gibraltar and this region’s status as a viable tax haven for British and European gambling brands.

From a geopolitical perspective, “the rock” has been the subject of a veritable tug-of-war between Spain and the UK over the years, and a no-deal Brexit will undoubtedly make this issue more acrimonious and precarious in the near-term.

In the case of iGaming, Gibraltar remains central to both UK and European markets, with an estimated 60% of the jurisdiction’s gambling industry staff choosing to live in Spain and commute over the border on a daily basis.

Should the UK exit with an agreement, the Spanish government may choose to create a virtual border that makes it increasingly difficult for people to cross the border into Gibraltar.

This will make the region difficult to access from both sides, with the UK market poised to take on the brunt of this given the number of firms that currently base themselves in Gibraltar in order to benefit from advantageous tax rules.

Even on a fundamental level, a no-deal Brexit would prevent British operators (including those based in Gibraltar) from seamlessly accessing European markets and players. Not only would this prevent UK firms from potentially beneficial liquidity sharing pacts across the continent, but it would also impact adversely on reach and long-term revenues.

If this were to become reality, British firms may choose to base themselves elsewhere in Europe and identify alternative tax haven jurisdictions such as Malta.

This issue could be compounded by Spain’s recent move to deregulate its iGaming market, with the authorities having slashed its gross gaming revenue tax from 25% to just 20%. Interestingly, this makes the Spanish levy 1% lower than the UK alternative, which was recently increased to 21% following a hike last spring.

Not only this, but Spanish enclaves such as Ceuta have been afforded greater levels of autonomy by the government in recent times.

This now autonomous city currently offers huge tax breaks to domestic and international operators that choose to relocate there, including a 10% levy on gross gaming revenues. What’s more, corporate income tax in Ceuta is capped at just 12.5%, while the rate of VAT is equivalent to just 0.5% overall (compared with 21% throughout the rest of Spain).

This could prove highly appealing to some UK operators in the wake of a no-deal Brexit, as they would be able to retain access to the lucrative European markets while simultaneously reducing costs and minimising their tax liabilities.

But what if the UK and the EU were able to negotiate a deal on Brexit and depart on the terms of a comprehensive and amicable withdrawal agreement? In this case, the market portents would be far greater for the UK, although this would depend almost entirely on the precise nature of the deal that was eventually negotiated.

However, in the event of a structured, regulated and orderly exit from the EU, the UK may be able to retain tariff-free (or at least low-tariff) access to the single market and provide a solid foundation from which operators can profit over time.

Regardless, there’s no doubt that all eyes in the online gambling market will be on the Brexit negotiations and the terms of exit come December 31st, with these set to have a huge (and potentially adverse) impact on UK operators in the near and medium-term.

Mobile Gambling and Subsequent Game Plan Enhancements

The rates of mobile penetration in the UK (and indeed, Europe as a whole) have continued to grow exponentially over the course of the last decade, thanks to the innovation of smartphones and the increased sophistication of devices over time.

In the UK, for example, mobile penetration rates increased incrementally this year, from 85.6% in 2019 to a new high of 86.5%. Interestingly, this trend will continue unabated over the course of the coming years, with the precise number expected to reach 88.5% by the end of 2024.

This trend is also reflected in the UK’s iGaming market, with more than 50% of all frequent gamblers on these shores now wagering prolifically through their smartphone or tablet. In Europe, an estimated 43% of all online casino bets were placed through mobile devices back in 2018, with countries such as Finland recording growth of 10% in mobile gameplay during the same period.

There’s a clear and inarguable takeaway here; with mobile gambling now established as the dominant iGaming channel and one that’s capable of generating huge revenues to the UK and European markets in the years ahead.

With operators and gambling websites now increasingly inclined to tap into mobile gaming and its associated technologies, there’s a pressing need to create high-definition content and pixel-perfect games that present well on smartphone display real estate.

This trend has expanded drastically and noticeably (particularly during the last couple of years), with consumers increasing wagering while on the move and demanding a seamless and consistent gameplay experience regardless of which device they choose to play on.

To deliver this, both software houses and iGaming operators will become even more reliant on HTML5 technology in 2021, with this underpinning a rising number of mobile games and allowing brands to offer the same libraries through both desktop and mobile channels.

In simple terms, this technology enables companies to create new elements and graphic standards on mobile devices, with a view to delivering consistent, dynamic and ultimately smooth gameplay experiences in line with ever-changing player behaviours.

Not only are new games consistently being developed in HTML5 technology, but existing titles are also being relaunched and redeveloped in line with the relevant upgrades.

Undoubtedly, the biggest benefit of HTML5 is that it allows players to access games directly through the latest iterations of mobile browsers, particular Safari (on iOS) and Chrome (on Android devices). This is crucial from the perspective of accessibility, as a surprising number of operators in the UK have yet to invest in the development of native apps for existing smartphone platforms.

As a result of the increased accessibility and sophistication of HTML5, we’re also seeing the use of Adobe Flash Player dwindle in the UK’s iGaming industry.

Importantly, this negates the need to download additional software to your device, creating a scenario where it’s easy than ever to wager your hard-earned money whilst on the move!

The Rise and Rise of ‘Enhanced Reality’ Casinos

Let’s face facts; concepts such as virtual and augmented reality have been intrinsically linked to the iGaming market for years now.

However, it’s only recently that the over-arching notion of ‘enhanced reality’ gameplay has breached the consumer mainstream from the perspective of online gambling, successfully bridging the remaining gap between corporeal and virtual casino wagering.

Most experts will testify that this technology truly took off this year, while 2021 is likely to see the trend become even more pronounced as the underlying technology becomes increasingly accessible. In fact, the widespread application VR and AR may well become the dominant iGaming trend during the next 12 months, with specialist slots (such as Gonzo’s Quest VR) and casinos now offering a next generation wagering experience to players across the board.

It’s arguable that augmented reality will become more dominant than VR in the near-term, as this simply seeks to overlay three-dimensional gaming graphics and animations over real-world environments, rather than immersing the user in a completely virtual setting.

This means that players can essentially access a virtual casino game, table or slot machine in the comfort of their own home, while remaining in touch with their natural environment and the precise location where they’re based.

Make no mistake; this technology is a little more accessible than virtual reality, with AR using more generic headsets, apps and digital cameras to create an altered but ultimately simulated gameplay environment.

In contrast, VR enables users to interact with a completely virtual world, essentially created a simulated reality and, in this instance, access to a 3D casino environment and a uniquely immersive gameplay experience.

With this type of technology, the environment created is at least 75% and 25% authentic, while players will need to invest in a dedicated (and often costly) VR headset that’s fully equipped with loudspeakers and a visual display to help you make the most of the experience.

Although this will also become increasingly popular in 2021, it’s AR that will ultimately drive the virtual gambling charge and create the final frontier in the gradual transition from corporeal to online wagering.

Taxation and the UK’s Status as a Market Leader

We’ve already touched on the potential impacts of an orderly and no-deal Brexit, but this isn’t the only threat to the UK’s status as an international iGaming market leader in 2021.

Certainly, the UK market is one of the most mature and developed in Europe, and this has also created a scenario where growth has slowed in line with increased saturation and increasingly intense levels of competition.

This trend has been compounded by an increasingly stringent regulatory climate in the UK, causing some international operators to exit the UK market and seek out more fruitful climates in Eastern and Northern Europe.

Take AB Cherry, for example, which is home to the popular ComeOn brand and exited the UK in September last year.

Upon leaving the UK and targeting immature and high-growth markets in Sweden and Denmark (to name just two), the firm released a statement confirming that the increased risk posed by new regulatory measures had evolved to supersede the benefits of operating in the UK.

The firm also highlighted increased competitiveness in the UK, which has served to reduce each operator’s core market share through 2019 and 2020. Also, the appeal of securing a license from the UK Gambling Commission (UKGC) has diminished of late, as this is no longer holds significant symbolic value within the European market.

These challenges must also be considered alongside rising taxation, with the remote gaming duty in the UK having increased by 6% following a hike imposed by the Chancellor last spring. This decision followed the fallout from the FOBT cap in the UK, which slashed betting limited for fixed betting terminals from £100 to just £2 and created a huge tax revenue deficit for the UK Treasury.

The Treasury has sought to do this by increasing the liability for online gambling brands, hitting multi-channel operators doubly hard while diminishing both the appeal of the UK market and the ability brands to make money in 2021.

For now, the UK market remains the single biggest entity in Europe, but there’s no doubt that growth levels stalled in the year ending September 2019 as these factors began to take their toll on individual operators.

When you also consider each of these challenges and issues in unison, it’s clear that the UK’s longstanding status as the world’s dominant iGaming market is under threat in 2021, and this is something that will be of great concern to operators nationwide.