Online gambling in the UK: how to stop the next epidemic

In May of 2018, Her Majesty’s Government announced to great fanfare that the maximum permitted stake on fixed-odds betting terminals will be cut from £100 to £2. But what of online gambling, the largest and faster growing segment of the gambling market?

But what of online gambling, the largest and faster growing segment of the gambling market where anyone with online access and a debit or credit card is able to bet and lose much larger stakes at all hours of the day? The numbers suggest that far more problem gamblers are to be found gambling online rather than on the high street. If protection of problem gamblers is a key objective, are we missing the mark?

In response, this blog looks at the size and growth of the British online gambling sector; the differences between the online and offline gambling worlds; the benefits and problems associated with online gambling; and the opportunity for the industry to act.

It contends that innovations in online gambling are fuelling greater numbers of problem gamblers. However, a key advantage of the shift towards online gambling is that companies now have far better information on problem gamblers. If this information is used properly, problem gamblers can be detected sooner and given support at an early stage, before considerable harm is done.

Great Britain: the home of online gambling

The Gambling Commission’s review of online gambling earlier this year stated that Great Britain now has the largest regulated online gambling market in the world, generating £4.7bn gross gambling yield per annum (excluding National Lottery and other lotteries). The size of the online betting sector exceeded the offline betting sector for the first time in 2015/16 and it grew by 11% in the 12 months to 31 March 2017.

The Commission’s statistics show that there were almost 23 million active online gambling accounts in the year to 31 March 2017, and approximately seven million individual UK consumers. As of January 2018, there were also 310 remote operators in the UK with a license to offer consumer-facing activities.

The size and growth of the online gambling market is of course a boon for the British Exchequer but being a first mover also means that adequate protections may not yet be in place.

Online vs. offline worlds

As with many other business sectors, an online presence is nowadays more efficient for gambling companies than having offline premises. For a start, online businesses are not tied to a bricks and mortar location with associated costs of rent, physical fixtures and restrictions on opening times. They can employ more effective risk management thanks to sophisticated transaction tracking technology and therefore manage liabilities much closer to real time. This gives them the ability to operate at lower margins which they can use to offer consumers better odds or bonuses.

Online businesses also benefit from not having a number of legal and regulatory controls that offline betting shops have to contend with. Offline premises have local authority controls on where they locate their physical premises; a physical limit on numbers of machines; and, crucially, limits on stakes and prizes. None of these apply to online providers.

As a result, consumers now have access to a wider range of markets and games with few limits on when, where or how they choose to gamble. They are able to compare an array of odds and products from different providers, rather than be stuck to the price offered in a particular store. The increase in choice has been accompanied by an improved gambling experience. Bolstered by faster internet speeds, operators can now stream live sporting events, which consumers can then bet on.

So what is the problem?

As with any new product or service that is in its infancy, the effects of such new innovations take time to understand properly and react to. However, a number of issues are becoming clear, including the following:

• The prevalence of online gambling advertising: It is hard to have not noticed the explosion on online gambling advertising on television and through sports sponsorship deals. This has led to concerns around the normalisation of gambling for young people, the volume of advertising, as well as concerns about the fairness and transparency of marketing and advertising.
• Lack of a proper industry wide self-exclusion programme: Currently those who want to exclude themselves from being able to gamble with a particular online gambling company are able to so on most sites for a set period of time. This is helpful to problem gamblers that want to stop. However, there is nothing to then stop problem gamblers from self-excluding from one site and then simply joining one of the other many gambling sites, which is typically what happens.
• Gambling on credit: Online gamblers can gamble using credit cards, which then also levy hefty transaction fees that many consumers may be unaware of. There is a concern that allowing gambling on credit cards increases the risk that consumers can gamble more than they can afford.
• Sophisticated gambling products are not subject to higher regulatory standards: There are now a plethora of online gambling products, some of which the occasional or non-sophisticated gambler will be not be well-equipped to understand. In other sectors, such as financial services, such products are only available to ‘sophisticated investors’ or ‘high-net worth’ individuals.
• Customer losses are effectively unlimited…: There are not effective controls across the industry to stop people from losing vast amounts of money very quickly online. If this is a genuine concern in the offline world, it should be a larger concern online. The online industry has set up features for gamblers to set deposit limits over certain periods, but this is a voluntary measure which most problem gamblers evade and are not actively encouraged to take up.
• …while customer wins are limited: With some operators, successful betting consumers have their accounts restricted so they are unable to bet on the types of market they are successful at or at the level of stake they want. This is a good example of online gambling firms using their data, but for their own advantage.
• Innovations such as ‘in-play’ can be subject to imperfect information and no minimum standards of information provision: Gamblers betting ‘in-play’ are able to bet on sports matches during games and also ‘cash-out’ before the game ends. However, ahead of such bets gambling sites provide varying levels of information upon which gamblers can base their decisions. Some statistical information can be misleading as to the actual state of a game and there is a wide disparity of information provision across gambling providers, which arguably leaves some gamblers less protected and less informed ahead of making gambling decisions.

The Gambling Commission is researching further on most of the above areas and is consulting on further action, but few mandatory remedies have been put forward as of yet.

Focusing on problem online gamblers

While the above issues will over time be worked out, of most immediate importance is the potential increase of problem gamblers arising from the move to digital. The ease with which one can now gamble online, coupled with the unlimited nature of losses and a lack of intervention, means that those that are vulnerable can fall into serious difficulty very quickly compared to offline gamblers.

Statistical evidence is still sparse given the relative infancy of the sector, but the limited data that is available shows that online gambling participation on the whole is on the rise and the numbers of those that are considered problem gamblers are not insignificant.

According to the Gambling Commission, participation for online gambling (as a % of the population and over the past four years, excluding National Lottery draws) increased steadily from 10.4% in the year to December 2014 to 13.6% in the year to December 2017.

Online casino games had the highest percentage of consumers classed as problem online gamblers (12%) with slots at 8%, bingo at 5% and sports betting at 4%. Within sports betting, it was dog race betting consumers that had the highest problem gambling rate at 15%.

Furthermore, recent research carried out by Professor David Forrest and Professor Ian McHale of the University of Liverpool has uncovered a number of interesting insights around problem online gamblers, including that:

• More than 27,000 slots customers and more than 11,000 non-slots customers were active on at least 22 days (per month), making them daily- or almost daily-players. Operators should be very interested in these players because the number of active days is recognised as a key marker of harm from gambling.
• While the proportions of big spenders are low, the number of individuals in question is non-trivial. In the course of January 2017, there were more than 22,000 individuals losing in excess of £1,000 on slots, whilst for non-slots play, there were more than 10,000 customers losing in excess of £1,000.
• There was a highly significant relationship between net expenditure in the month and number of active days in the month.
• The placing of high stakes is not a very ‘sensitive’ indicator of problem gambling since many problem gamblers stake at only modest to low levels. However, it is likely to have high ‘specificity’ (i.e. there is a high chance that any individual placing large stakes is a problem gambler).

Why data holds the key to providing the right remedy

The vast majority of gamblers clearly do not have problems so blanket regulatory action that will close the door to gambling products for the majority of players would be blunt and unnecessary, and also disregard some of the economic and leisure benefits that accrue from the industry. But for the significant and rising number of problem gamblers, policies need to be in place to identify and remedy the problem swiftly.

The solution seems to be close to home. The move to digital means that online gambling companies now have access to significant amounts of data on usage which could be used to identify problem gamblers. If this data was shared across the industry and then accompanied with the relevant intervention and support, this issue could be tackled without the need for significant further intervention.

GambleAware commissioned a study in August 2017, which found that problem gamblers could be accurately detected with the data currently held by operators utilised alongside a set of 22 predictive markers to create a customer specific risk score. It also found that demographic markers could be used to identify higher risk consumers at account registration and that these could be enhanced by using behavioural markers such as bet value or day of week gambled.

Corporates are clearly able to track important problem gambling indicators such as:

a) data on length of activity

b) data on time of play

c) data on use of gambling management tools

d) net expenditure

e) frequency of gambling

If this information is collected and combined with other datasets which could help to understand the consumer better and then shared appropriately across all providers, problem gamblers could be better identified, stopped from self-harm on one or across multiple platforms, and given the necessary support to ensure that they do not fall into trouble.

Will industry rise to the occasion?

It is counter-intuitive in the short-run for gambling organisations to root out the source of some of their most significant revenues. There are also competitive challenges around such collective action unless the whole industry commits to collecting and sharing relevant data points. In addition there will be issues around data protection. However with the right will these issues can be overcome and such self-policing should ultimately be of longer-term benefit to the companies involved.

The industry and regulators are already taking steps to help. The Remote Gambling Association has developed a set of good practice guidelines for data analytics. The online sector will soon implement the national online self exclusion scheme (GAMSTOP) that will allow online consumers to self-exclude from all Commission-licensed online operators in a single step. The Gambling Commission is consulting on a number of different policy areas such as customer due diligence, age verification, consumer protection, and advertising, which might inform further action.

To be sure, all this might gradually move the online gambling industry into safer and fairer territory. But not everyone is convinced and many politicians are wising up to the problems associated with problem online gambling. Time is running out if significant regulatory intervention is to be avoided. Much of the solution lies in the power of data – it is now in the hands of the industry to prove it is serious about tackling gambling addiction online.