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you know, they wanted a consumer level protection. Fine, you're getting that, right? But then what is the consumer lead pushback? Financial risk assessments, affordability checks, whatever else you'd like to call them, they're one of the most talked about new measures when it comes to the re-regulation of Western European markets. They divide opinion, and they could have massive ramifications. So, as the UK Gambling Commission provides an update on its pilot of risk assessments, we look at what they are and how they could reshape the UK market. Welcome back to iGaming Daily, supported by Optimove, the creator of positionless marketing. and the number one player engagement solution for sports betting and iGaming operators. I'm Charlie Horner and today I'm joined by SBC Media's editor-at-large Ted Menmure. Ted, how's things? Very well, surely. I suffered yesterday through your controversial 1-0 against West Ham. oh Onto a brighter topic today, yeah. Onto an equally controversial topic, you could say as well. Yeah, It's good to be, know, Dancing Partners, you know, a duo for this episode, Ted. And it could be an interesting episode because financial risk assessments, affordability checks, they have been a huge topic in the last, probably since the review of the gambling act, you know, so a good... three or four year period, it might be just beneficial for everybody if we just define what affordability checks are and tell people why they are a little bit controversial. Okay. So, so to me, the, the point of controversy is the mandate itself that has not been delivered and is now turning to somewhat of a game blame and it's not looking good for DCMS and the UK Gamma Commission as the regulatory authorities of, you know, gambling in the UK. And I think we've got to of reflect back and remember that affordability checks was, know, pitched as the principal reform pursued by the UK DC and DCMS during the consultation period of the white paper, which was 2023, 2024. And we have engaged in this previously and, you know, coming on this about risk checks that they were always going be like the highest kind of technical, all the assault apps, the technical safeguard and generational change of the white paper going from analog to fully digital, which is okay. It's a great tagline to have, but again, it's how do you kind of fulfil that mandate? it's been, look, put it simply, it's been a two-year kind of test pilot that's been implemented with three stages of checking that threshold from 500. to 150 pounds and then transferring it on into live environment. And the feedback has been very limited to stakeholders. And as stands, we don't know the efficiency of these checks that were set at a target rate of 3%. And whether the project or the protection is viable. uh There's still so many questions to be answered about. even on the basics of where we are in terms of UK gambling and the white paper and its protection mandate. Yeah, it's a long history and we'll get into the pilot scheme and some of the results of that in a little while. But you mentioned that it was a mandate of the gambling commission and DCMS. just going back a little bit, why are affordability checks being introduced in the first place. know it's one of the key reforms that was mentioned in the review, but who was putting pressure on the government and the gambling commission to introduce these kind of measures in the first place? Okay. So again, returning back to the introduction of the white paper, what the white paper wanted and what DCMS pitched for. DCMS in its first technical consultation, it wanted feedback and it wanted a kind of uh to find a rebit to implement kind of generation protections in which DCMS, and this is what it stated, it that wanted that the mechanisms of controls and protections that will provide a new layer of safety onto the general consumer of gambling. And the commission responded by backing kind of light touch affordability chase in that term as part of its, uh which formed kind of part of its wider mandate to create a single view of participation in the providence of UK gambling via a new kind of, it's greater kind of data, data, data should view of UK gambling licences and taking kind of greater, greater input from them. And risk assessments for consumers were kind of backed on a technical level because it was viewed that, it was viewed as part of a kind of wider kind of compliance overhaul of UK on high risk sectors and the use of kind fintech and open banking procedures to check on consumers and consumer redress. uh Three years on, I think we've had kind of a reality check on all industries. And uh what we found is that affordability or to predict or to project on someone's affordability is a very, very acute science. Yeah, it's a complicated process. It's controversial and we know it's controversial because people don't necessarily want to think that gambling companies or the gambling commission is looking through their credit history and things like that. But as you said, Ted, there's been uh a pilot scheme, a of a test run of the financial risk assessments. What's the gambling commission said about the results of that? process and what learnings it can take in terms of a wider rollout. So it's bit somewhat of a mixed message. mean, the last one we had was an update from Helen Rhodes, kind of leads major policy projects like the UKGC. And the commission kind of stands by its target that it believes that it will get that 3 % of active gambling accounts that will be going to trigger an assessment and it can leave cutting 97 % of checks. that will be left kind of frictionless, right? However, it has had to kind of reiterate its projects and the terminology of its projects. When it points to that 97 % of accounts, it's not saying that they won't be checked on. They will have some form of of overview on them that the actual general customer will change. So at the same time, UK gambling will implement a new kind of out wide restriction. I mean, an out wide check on customers. Also, it's been provided a little more clarity on the checks that it's implemented there, especially kind of on how it's going to gauge in kind of customers income and affordability to actually spend on gambling, which is part of what's been missing from the feedback. It's like, what are kind of the remits of what is affordability onto a customer to actually be able to spend and what is considered kind of that level of risk. It's also kind of the indicators. that it's looking for are kind of arrears, defaults, banks, and debt management of the account itself. So I think that it's now kind of creating that mold of this is what we're looking for when we verify our customers, these are the sides of stress that we want to kind of pick out and say this is what forms the 3 % that we're looking for. Yeah, it's a really interesting blog that the commission's... put on their website and it does kind of give themselves a pat on the back. It says, know, the white paper suggested that 80 % of assessments would be frictionless and they're saying 97%. And there's a few other stats in there. But I think at this point it's why can we have kind of this transparency at the first, we took them to kind of stage three to come back with this and say, look, this is what we're looking for. These are kind of the areas. And this is what we define as a high risk customer or someone who does need that extra level of security and extra level of checking. And look, we're three years down the line and okay, some form of is always welcome. I think the Gavin licenses will look forward to that, especially the customer service teams and the team fan that work in customer care. it's taken a long time to kind of define that. that remit and those boundaries. Yeah, for sure. Do we know about what the next steps are in terms of a wider rollout or more consultation with the licensed sector in terms of how this would actually be implemented if it was rolled out on a much wider scale? Or is that still something that needs to be determined and worked out with? At this stage, there is no confirmation for kind of full scale rollout or financial risk assessments and when they go to a live phase that's still very much under the gambling commission's pilot and its control. But I heard again they said that changing the what it's undertaken in that update in April 2020 cease was put out to kind of temper uh anxieties on the plan. and also to uh respond to negative to what it believes as being false reporting by the media in terms that it had already implemented checks on general consumers which had never happened. And you saw the commission again go out and defend its projects and defend the general direction of the Gamla Commission. Welcome back to iGaming Daily. Now, we've talked a little bit about the process of how these affordability checks are going to be rolled out and tested. Now let's talk about some of the reaction, because we've mentioned that These risk assessments are a controversial measure. The industry has not always been the biggest fan of them. What are some of the arguments for and against the introduction of affordability checks? From my view and in terms of the of the feedback, like I've seen in the affordability checks discussion is that is this kind of the best consumer protection? And how we just is, has, has the regulators just pegged themselves to it's affordability checks or nothing, could have taken another route that's kind of more grounded in actually putting a layer of protection onto not only the consumer, but all activities or all provisions of UK gambling. And that would have probably gone down kind of a data sharing scheme that is more kind of laborious than just what it kind of deems as kind of panacea of affordability checks. onto these customers. Now the other factor here is that it swung very much for the fences for that kind 3 % target and whether that's going to be applicable and we'll find out. And the fallout here is that, okay, if you don't get that right, what if it jumps up double to 6%, that's a lot of checks coming in, right? And what the clarity said, what the update stated from the commission itself that just came in that, look. there will be an accountability or a new check on that 97 % of customers. So there is going to be some form of affordability being placed on that 97%. So again, it's how kind of stretched, how kind of manipulated that term of kind of frictionless has been undertaken and whether there had kind of other, whether any other options were studied. in this whole process. Yeah, you can see the argument for it being that you want to identify those vulnerable customers who might not be able to afford to bet the amount that they are. Then you can see on the other hand that people might see that as an infringement on their personal liberties and they don't necessarily want to think that gambling companies and the commission are looking at and all the credit rating is just so they can put an accumulator on at the weekend. I know there will be thresholds and things like that, but I think that the point still stands. is there a plan in place to sort of be able to strike that balance between identifying those vulnerable customers and then not sending those lower risk players just to the black market where they won't have to be checked? We'll find out once he goes into the whole life phase, but going back to... that question, it's also the vagueness here that's being applied by the UKTC. And it's not taking into kind of, into any of the kind of intricacies of UK gambling, and especially its customer base, right? So you're dealing with, you know, you might have customers that are spending 10 pounds a month, right? To customers that are spending, you know, 500, a group of people. Percentage why and to just kind of team them and say look this affordability. This is what we believe in affordability These are the terms of afford abilities. There's no kind of factor in how these guys spend their income right or You know, what would kind of be how are they kind of guessing? know, whether customers of VIP whether he's got a tactic where he's you know, a professional gambler Also, which markets are being under which what kind of bets they're placing. Yeah, those segments of customers that you talk about there, VIPs or people with just high disposable income, if you look at those segments, they're probably more likely to be bit more tech savvy and seek out those alternative platforms if they feel like those checks are becoming a bit too stringent or not frictionless enough for them. I guess that's where we need to... consult with the industry and consult with consumer groups to find out where the balance lies. But I think these are the customers that are more susceptible to friction, so they're not going to jump through these hoops. again, why should you be asked the same question to take out a mortgage as it is to open a new kind of uh bookmaker account? And then what we've also found out here is that it's getting harder and harder. for your tier ones and your counting PLCs. And this has come back from the Q1 numbers that, especially in the UK, to retain high spend customers. So it doesn't necessarily mean that they go to the black market, but it means that if you put too much friction on these accounts, they will look elsewhere. And then you get this query of the tier one operators. How much can I risk? How intrusive should I be on this account? Just to fill my compliance, but I might let a VIP or a high value customer go to a competitor of mine. I've just become too annoying. So there are so many things to process and balance out. It's a period of transition even beyond the compliance. Absolutely. You could take up an argument against the term frictionless in entirety, I guess, because even though you don't have to submit documents or things like that, there would be a check on your file. even if that doesn't impact your history or your scores or anything like that, it still feels intrusive. isn't 100 % frictionless, is it? So do you think those kind segments of customers would be happy for those kind of checks? Or do you think that is another factor in terms of either sending them to the black market or just for them to reduce their spending on gambling with licensed operators? No, because here I think what's happening is I think maybe the authorities are going to try and move the goalpost. And again, the... This is all part of a puzzle of like trying to kind of settle and fix and land the white paper and its terminology. And all the DCMS asked was like, what is an appropriate layer of protection onto a consumer? And I think now it comes to like, okay, how do you settle that part of the puzzle? And how much are you gonna willing to move the barriers and say, well, okay, look, yes, 3 % of customers are gonna get big checks to be asked these questions, right? The other 97 will go through this process, right? But this is what we determine as frictionless, right? It might be, And what we are finding out now as we move on to, by the end of the year, I think we'll move on to the kind of live stage is that what it actually looks like. And we've seen this in other industries as in, they file these checks, they tell you that this is gonna be the scheme, but we only find out when they move to the reality of that compliance and of that procedure. And just before we wrap up, I think there will be a lot of concerns about this being a push factor towards black markets and the gambling commission, we know that they're doing a lot of work to try and combat the black market and they've just been given... think £26 million and then the government set up the illegal gambling task force to try and tackle the unlicensed sector. There's been a bit of discussion over the last week or so after the gambling commission also put out an advert for a head of illegal gambling. Do you have any thoughts on that development and what that might look like in practice? Yeah, look, it's a new story they've got a lot of headlines, especially... in terms of what they will pay this man and the scope of what they're undertaking. um Look, I'm no doubt that the EGC considers the black market a huge risk, but I think again, we're gonna find out more about this once we kind of implement the technical stages of oh the technical restrictions of the white paper and... Even in this process itself, even the think tanks that supported uh affordability checks have now changed their postures and have even said, you know, don't process them unless you're completely sure that they are effective and that they don't cause any friction on, I again, the key term here is friction, any friction onto the consumer. uh I think the nightmare situation for the UKGC is that if it implements restrictions, that changes the habits of the general consumers to go, but it's easier to gamble there. And then I think that's where it applies, especially with the higher spending segment is that I don't need to tell anyone my information to do something I was doing six months ago. So why should I do that now and why should I change my habits? And I think that it's a dangerous place when you force consumers to change their habits. We've seen this in tobacco, we've seen this in drinking where, of course, you're going to undermine the legal market, right? Just because you know that the option is so easy. It's actually easier online, yeah. Yeah, 100%. And I feel like if you are going to bring in measures that change the habits of the users, then those in the license sector at least want to see the government. the gambling commission is doing something to tackle the black market. uh I feel again, like this is not a part of the conversation that we've got any license or that any stakeholders have had back with the UK GC and DCM is, is that, you know, they wanted a consumer level protection. Fine. You're getting that. Right. But then what is the consumer led pushback? Yeah, that's question that will remain unanswered until it's answered and we see some of the effects of the measures that we've been talking about today, but Ted, I think that's a great and intriguing place to leave things today. Thanks a lot for taking the time and sharing your thoughts on this one. And thank you to our audience for tuning into today's episode of iGaming Daily and to Optimu for supporting the show, as always. And join us again tomorrow to keep up to date with all the latest global gambling news. you