What Will Online Casinos Look Like in 10 Years?

Posted by Harry Kane on Thursday, April 29, 2021

You don’t need to be an expert in technology or iGaming to understand how the gambling industry has changed over the course of the last two decades. After all, online gambling didn’t exist in 1990, with the first virtual casino not thought to have launched until 1994 (although considerable doubt remains about which casino platform earned this honour).

Regardless, the online gambling market has evolved into a large and diverse entity, and one that generated a GGY of £5.7 billion in the year ending March 2020.

There’s no doubt that this market is facing significant challenges, however, despite its continued growth and relentless evolution. In this post, we’ll look at some of these challenges in further detail while asking what the online casino landscape could look like in 10 years’ time.

The Current Market and its Most Pressing Challenges

Not only did the iGaming market grow at an impressive rate of 8.1% in the latest reporting period, but it has also seen sustained growth across its core niches.

Online casino games (which account for more than 54% of the total virtual GGY) grew to account for a gross gaming yield of £3.2 billion in March 2020, for example, with slots central to the popularity of this niche.

Remote sports betting is the second-largest generator, and one that generated an impressive £2.3 billion in revenue during the same period.

Even online bingo followed up a stellar 2019 to grow incrementally by a further 0.9% to £176.8 million in March of last year, as players continued to transition from brick-and-mortar gambling outlets.

As the iGaming market has continued to grow, it has also claimed an ever-increasing share of the gambling industry as a whole. More specifically, it grew to account for 38.1% of the gambling sector in the UK, with this percentage forecast to increase further over the course of the next decade and beyond.

This relentless growth shouldn’t distract from the challenges facing the iGaming industry in the UK, some of which have arguably impacted on the rate of online growth and caused some operators to revise their revenue and earnings forecasts during the financial year 2020/21.

Certainly, iGaming has become a clear target for the UK regulator and legislature over the course of the last two years, resulting in a number of stringent measures and proposals that may continue to squeeze profit margins in the near and medium-term.

Back in 2018, for example, the UKGC outlined its core strategic objectives through 2021, with the most important of these being the protection of vulnerable and underage players in the UK. It also pledged to improve the reputation and transparency of operators, by enhancing verification processes and ensuring that players have continued access to their winnings and earnings.

We’ll touch more on the concept of transparency a little later in the piece, but it’s the proposed intervention of the UK government that may prove to be more damaging for the short and medium-term growth of iGaming.

More specifically, the All-Party Parliamentary Group (APPG) has conducted a thorough investigation into the iGaming industry, resulting in a number of eye-catching proposals that could be given wider consideration within the market.

Firstly, legislators have recommended capping the maximum online slots stake at just £2, with this mirroring the stringent restrictions imposed on fixed-odds betting terminals (FOBTs) in bookmakers throughout the UK. This was formally rolled out in April 2019, causing widespread store closures and job losses while seeing bookies lose more than 50% of their annual revenues.

Such a move would also dramatically impact on the GGY generated by online casinos, particularly as slots currently account for more than two-thirds of virtual casino revenues. High-variance slots also offer huge jackpots to players, although it’s fair to say that this type of game pays out on an infrequent basis.

Of course, profit would be less adversely affected as winnings will decline in line with the maximum stake amount, but this is a huge concern for online casinos who would have to make significant changes to their business models if the proposal ultimately became law.

The group has also moved to completely ban online iGaming advertising and prohibit VIP membership schemes, the latter of which appeal to a small group of high-stakes players who dominate the contributions made to online casino coffers. Both of these measures would impact on earnings, while the removal of legal advertising channels could make it hard for casinos to grow and reach new target audiences.

These measures would also be implemented alongside a comprehensive licensing review in the UK, which would apply to existing license holders in addition to new applicants. Make no mistake; operators that failed to meet the new and increasingly stringent criteria would either have their license revoked or be refused accreditation to operate in the UK market, and the mere threat of this is creating huge uncertainty amongst even established brands.

Of course, most commentators have noted that not all of these measures will come into being, while some may also be amended prior to being passed into law (such as the betting cap for online slots).

Still, there’s no doubt that operators are facing a slew of regulatory challenges in the modern age, which are beginning to undermine long-term growth plans and could potentially diminish earnings (and growth potential) in the future.

Meeting These Challenges – What Will Online Casinos Look Like in 10 Years’ Time?

There’s little doubt that the market will face at least some regulatory measures in the coming months and years, with operators that embrace these and establish themselves as ambassadors for responsible gambling the most likely to command a more significant market share.

However, there are some technological trends and innovations that may negate the need for the most stringent measures, with these also likely to shape the casino platforms of tomorrow and the typical wagering experiences enjoyed by gamblers.

Take blockchain, for example, which is now producing third-generation technologies and networks that could be set to revolutionise online casinos and help the UKGC to achieve its objective of creating greater transparency within the industry.

For example, there remains a regulatory grey area that surrounds virtual iterations of games such as blackjack or poker, which typically require elements of skill and strategy. As a result, they’re not directly regulated by the UKGC, which can create issues in terms of guaranteeing the effectiveness of RNG software and the accuracy of the winnings returned.

Blockchain resolves this issue on a fundamental level, however, primarily because it serves as a decentralised ledger that provides an immutable and transparent store of records in real-time.

In this respect, it replaces the need for regulators on a fundamental level, mainly by ensuring that all transactions are transparent and creating an immutable record of outcomes, deposits and withdrawals. You’d also be able to review all winnings paid out to ensure that they’re consistent with other players’ winnings, while confirming that precise amount by the site from each hand or transaction.

While this could potentially offer huge benefits to the iGaming market in the UK, the question that remains is what precise form would a blockchain casino of the future take?

In simple terms, an online casino would store all its financial documents, records and transactions to a blockchain ledger, which can subsequently be accessed in real-time and from anywhere in the world.

An operator could then develop a customised, blockchain-based wallet for registered players, allowing for immediate and transparent transactions which are inherently secure and negate the need for any fees or commission charges.

The operator even has the opportunity to create a custom casino token, which enables players to cash out their winnings in real-time and at a preferable exchange rate based on your selected cryptocurrency.

As for player security and verification, casinos could create an access or permission management system, which would be founded on a contemporary ‘Know Your Customer’ (KYC) database and deployed smart contracts. These refer to a set of predetermined and automated actions that are part of the wider blockchain, which would create a transparent relationship between players, employees and operators alike.

Such smart contracts would also enable employees to access player account information in a secure and limited way, ensuring further transparency and trust to be cultivated over time.

Interestingly, the development of this type of casino would also benefit from the emergence of third generation blockchains such as Cardano, which have been primarily designed to tackle issues of efficiency and scalability that exist with previous iterations such as Bitcoin.

For example, Cardano launched its off-chain scalability protocol on March 25th next year, with this referred to as ‘Ouroboros Hydra’. This took five years to develop fully, while it allows for vastly increased scalability and relatively low latency on the blockchain even as it continues to grow.

With Hydra, each user who connects to the network generates ‘10’ heads, which are essentially throughput lanes for data and individual transactions. Because of this, the system reportedly gets faster and decreases its latency as it scales, which is completely opposed to the trend showcased by Bitcoin over time.

Not only this, but simulations carried out by the University of Edinburgh show that each Hydra head can handle an estimated 10,000 transactions per second.

It’s also thought that the process can be further optimised to create 1,000 individual heads within the network, creating a scenario where processing one million transactions per second could ultimately be possible (this would comfortably exceed the current capacity of global payment systems such as Visa).

This would be music to the ears of even large-scale online casinos, who could build their platform on the Cardano network to handle secure, transparent and instant payments regardless of how many consumers are playing at any given time.

Future blockchain casinos that are built on the second-generation Ethereum blockchain (or compatible network) could also market themselves to players by eliminating the so-called ‘house edge’.

This would be thanks to Ethereum’s capacity for allowing the development of decentralised apps (DApps), which would effectively enable the foundation of completely decentralised casinos and where no central control exists.

As they’re run autonomously, the need for a house edge to be established is removed, with a relevant DApp casino’s transactions (or wagers) stored securely on the blockchain for all interested parties to see.

In this instance, casinos would profit through Initial Coin Offerings (ICOs) when starting out, with the founders retaining a share of the issued tokens that will appreciate in value over time.

Similarly, casinos would also focus on generating profit through skill-based games such as poker and blackjack, which introduce a natural house edge based on your individual ability and the decisions that you make in real-time.

What Else Will Shape the Online Casinos of 2030

While the case for the online casinos of tomorrow being driven by blockchain technology may be a compelling one (particularly from a regulatory and transparency perspective), there may be other changes that impact on the typical wagering experience over time.

Virtual reality (VR) games will undoubtedly become increasingly commonplace during the next decade, for example, with this already a key focus amongst developers in the marketplace.

Remember, the world’s first VR casino was launched back in 2015, while a growing number of similar slots and games have since been developed. This trend will continue to gather momentum through 2030 and beyond, as graphics improve considerably, and the cost of affiliated hardware (such as headsets) fall incrementally year-on-year.

With this in mind, VR-gaming will be widely used to create a genuinely immersive iGaming experience in 10 years’ time or so, with players able to recreate a corporeal casino experience from the comfort of their own living room.

We’d also argue that players will access online casinos almost exclusively through their mobile devices by 2030, with an estimated 51% of gamblers regularly wagering through a smartphone or tablet as recently as December 2018.

By this time, most casino games should be accessible through native Android and iOS applications rather than responsive mobile casinos (although this will remain an option for players), while advanced flash technologies will have also been developed to provide a more secure and immersive online experience.