Betting with borrowed money

I suspect every responsible gambling business in the UK would agree that they oppose the idea of their customers betting with borrowed money, Indeed, that is precisely why the use of credit cards to fund betting accounts was banned in 2020 - with the full support of the BGC, lest we forget.

But things are never quite that simple, and recent research published by Open Banking provider Abound suggests that UK bettors are borrowing up to £174 million a week in order to fund gambling accounts.

Before going further, it’s worth pointing out that this research comes from the other side of the fence, as it were, with the focus on the willingness of banks and other lenders to lend money to people who are then spending that money on betting (they are unwilling, in case that wasn’t obvious). That’s the business Abound themselves are in. Open Banking enables them to lend on more favourable terms and (take note Racing Post) people don’t seem to object too much to sharing data if they get something in return.

But quite obviously this whole subject has a significant impact on how the betting industry thinks about responsible gambling and player protection. Or at least, it should. 

So what should be done?

Well, let’s admit we have a problem first. Abound is not the only organisation telling us loud and clear that this represents a challenge for the industry. Recent research conducted by Censuswide, for example, revealed that an extraordinary 35% of British university students claim to have borrowed money in order to bet. 

Does that matter? Short answer: yes. The industry simply cannot afford a never-ending stream of stories about serious financial harms caused by gambling, to which betting with borrowed money is an obvious contributing factor. We can never eliminate the phenomenon entirely, but we should be doing our best to spot it and stop it whenever possible.

The difficulties associated with that task are mentioned in the Guardian article linked above, but can be summed up in one line: traditional passive credit reference checks are not capable of spotting customers who are borrowing in order to bet. Indeed, customers who pass such checks with flying colours are well-positioned to do exactly that (although to be fair, that situation may not last indefinitely).

What can spot this activity, as Abound, and indeed ourselves at ClearStake, know, is Open Banking (which is extremely quick and easy - see below). Or, if you have a lot of time and money going spare, you can check actual bank statements. And here’s the really interesting thing: most operators are doing this already. They just happen to be looking for something else. 

When any customer deposits over a certain amount, an operator is legally bound to determine the source of that money. It’s called anti-money laundering legislation, and it isn’t going away any time soon. And that job can only be done by understanding the flows of money into an account (that’s kind of the whole point).

Three birds with one stone

We have an opportunity in the gambling industry, even though it may not feel like it right now. We have the chance to think rationally about solving multiple responsible gambling challenges at a single stroke. 

Specifically, what is to stop smart operators running a single Open Banking check on higher spending customers, that takes less than a minute, in order to answer three key questions:

  1. Can you afford this level of staking?
  2. Does your money come from a legitimate source? 
  3. Did you borrow in order to fund your account?

As above, answering that second question is already a legal requirement. This isn’t anything new. It is simply putting gambling on a safe, secure footing. It is protecting players, and protecting players means protecting the industry as a whole.

Because it would be foolish indeed to think that more draconian legislation is not on the way if gambling harm stories continue to run in the media. If we continue to allow players to bet with borrowed money, we are on borrowed time.