Will Affordability Checks Boost Unregulated Operators?

Posted by Harry Kane on Tuesday, June 14, 2022

After multiple delays and a seemingly interminable period of time, it appears as though the government’s comprehensive white paper on the UK’s gambling industry will finally be published soon. This is set to introduce a stringent range of new measures and reforms, which could change the face of iGaming and impact turnovers across all betting brands and verticals.

Of course, sportsbooks and casinos are pushing back on some proposed measures, including the introduction of affordability checks for customers. While it’s thought that sportsbooks are willing to implement such measures for high rollers and VIPs, some lobbyists are pushing for affordability checks to be rolled out for every players and online gambler.

However, it’s thought that this (along with other restrictions) could push some British punters towards the unregulated iGaming marketplace. But is this the case, and should the government hold a detailed consultation on this specific issue before implementing such a measure?

What are Affordability Checks and What’s the Consumer Response?

The term ‘affordability checks’ is quite vague, but in this instance, it refers to some selection of measures that will be used by iGaming operators to verify the earnings and income of individual bettors and determine that they’re wagering within their means. For example, customers may be asked to provide payslips and proof of their weekly or monthly earnings, with this information reviewed at regular intervals to ensure affordability and fairness.

As we’ve already touched on, it’s widely accepted within the industry that some affordability checks will need to be rolled out in response to the white paper. For example, there’s no doubt that VIP players and high rollers will be subjected to affordability checks going forward, due to the sheer amounts wagered by these individuals and the incentives they’re provided with.

Remember, a report from The Guardian in 2020 found that iGaming operators were heavily reliant on the income generated by high rollers, who comprise a small number of their total customer base. In once case, an anonymous operator was found to derive 83% of their total deposits from just 2% of its players, the overwhelming majority of which wagered through VIP initiatives. Members of these schemes are also more likely to become problem gamblers, so it makes sense that operators verify their income and suitability for high value incentives.

However, most experts and betting brands don’t believe that such measures are necessary for the majority of gamblers, and that affordability checks should only be used in specific, ad-hoc cases. This view is supported by certain figures, as the average Brit gambles just £2.60 per week (including the National Lottery) and £135.20 per year overall, suggesting that most customers are casual by nature and never wager outside of their means.

This opinion appears to be shared by British punters too, with a recent poll suggesting that nearly 80% of this demographic are concerned that affordability checks and similar restrictions will actively push customers towards the black market and unregulated space. This fear has been echoed by some politicians and commentators, although it remains a minority view in Westminster.

The research was carried out by YouGov on behalf of the Betting and Gaming Council (BGC), so the findings have to be considered in their true context and in relation to the way in which the question was phrased. However, it was discovered that 79% of gamblers believed that restrictions “could result in people moving to unregulated websites”, where no such affordability checks or gambling limits are imposed.

At this stage, we should note that the white paper may also recommend that online slot betting is capped at £2 per spin. This has broad similarities to the FOBT cap rolled out in April 2019, which slashed offline bookmaker revenues by around 56% and saw widespread job losses nationwide. Ultimately, the combined impact of such measures could push players out of the regulated marketplace and into the arms of rogue operators.

The poll also found that a 70% of respondents who took part in the survey said that would consider alternative bookmakers and online casinos if stringent affordability checks were utilised. More specifically, they’d most likely refrain from wagering with a brand that asked punters to verify their earnings with private financial documents, making unregulated operators more attractive in the process.

The Risk of Widespread Affordability Checks

Approximately 22.5 million adults take part in UK gambling on a monthly basis, whether they participate in the lottery (either on or offline), play online bingo or wager at a virtual casino or remote sportsbook. This is a large and constantly growing number, and lobbyists have leveraged this figure to highlight the importance of introducing stringent and more relevant restrictions in the digital age.

However, the BGC claims that the rate of problem gambling remains low and relatively unchanged over an extended period of time. This assertion is supported by the UK Gambling Commission (UKGC), who have confirmed that as little as 0.2% of the country’s adult population can be categorised as gambling addicts, while this number has declined nominally from 0.3% when compared with the previous year.

At the same time, the regulated market in the UK is thought to support more than 110,000 jobs, while generating as much as £7.1 billion for the local economy and making a total tax contribution of £4.2 billion. In the wake of the FOBT cap, iGaming and remote betting operators have evolved to dominate the market and become key economic drivers, but the creep of legislation and stringent regulations are beginning to take their toll.

To this end, the number of customers using unregulated black market betting sites has already more than doubled in recent times. More specifically, 460,000 Brits now wager in the unregulated marketplace on a regular or recurring basis, with this number up from just 210,000 a few years ago. This trend will most likely accelerate in the wake of further restrictions, especially if they’re untargeted and disproportionate to the issues that they’re trying to solve.

The Last Word

While the need for affordability checks on high rollers and VIPs is universally accepted in the iGaming realm, attempting to impose this measure on everyone or at a low level could have a negative effect on the industry. It could certainly push privacy-conscious players who don’t want to share their financial information towards the unregulated market, for example, while also impairing their industry’s growth and causing widespread job losses.

This could also translate into local economic contraction and reduced tax revenues, without doing anything to tackle a problem that doesn’t impact the overwhelming majority of players. So, it should be hoped that regardless of the recommendations made in the upcoming white paper, a subsequent consultation helps to create perspective and more informed reforms going forward.