Can affordability checks be a source of acquisition? (Spoiler - the answer is yes)

Today, many gambling operators exclude a number of potential new customers before they stake a single penny. And in many cases, there is absolutely no reason to do so. 

Fortunately, it’s now possible to take the guesswork out of the process and allow players who would otherwise be excluded to play: and crucially, play safely. Let’s find out how.

The trouble with passive checks

Most gambling businesses exist to make money. But they have a regulatory obligation, and in most cases a genuine desire, to protect players who are either vulnerable or simply cannot afford to gamble at a certain level. 

For this reason, checks are usually performed early in the lifecycle on every newly registered customer to ensure that they do not fall into either of these categories. These checks include (but are definitely not limited to):

  • Establishing average income levels for the area in which a customer lives
  • Basic credit score checks, and
  • Checking for defaults, bankruptcies, court judgements in the individuals past

All these checks have two things in common. The first is that they are passive: the customer themselves does not know they are happening, or what ‘score’ is returned. The second is that, when it comes to accurately determining the risk profile of any given customer, they aren’t particularly accurate.

We’ve talked before about one way in which this lack of accuracy hurts gambling operators. But consider another. Something like 5 to 10 to percent of new registrations (and we’ve heard as high as 15%) are flagged ‘red’ after passing through these checks. And for many operators, that signifies the end of the relationship.

They have, in effect, lost 10% of the acquisition they paid for before a single bet is placed. I think it’s time to ask if they are doing that based on accurate information, or just guesswork. To give one simple example, an individual in rude financial health can have an account closed simply because they missed a loan repayment years ago.

Enter real financial data

It isn’t a surprise that in the past, quite rightly, a ‘red’ score returned from passive checks effectively closed an account. Not long ago the process of collecting real financial data - the sort that enables us to make informed decisions about which customers can stake, and which need to be protected - was laborious and costly.

To put it simply, it wasn’t worth the effort to confirm that every decision was the right decision. 

But that has changed. Thanks to platforms like ClearStake, t is now incredibly easy to collect and interpret financial data. Both for the operator and the customer, it takes a grand total of 2 minutes to share the relevant information and reach a decision, whether that is done via Open Banking or conventional statements. 

And what this means, of course, is that the equation has completely changed. There is, literally, no excuse whatsoever for not reaching out to the 10% of customers you reject on the back of passive checks. Some will ignore you. Some will share data and still be deemed not worth the risk. But some will be able to demonstrate they are no risk at all.

And ‘some’ is always more than zero last time I checked. 

It is important to be clear here that this approach isn’t about cutting corners or not applying careful affordability checks on customers in search of more revenue. In fact, it is precisely the opposite. It is about enabling potential customers to demonstrate, conclusively and unambiguously, that they do not represent a risk. 

We understand that most operators are looking first at a solution like ClearStake as a way to reduce the significant churn rates seen at enhanced due diligence (EDD), and to save the time and money associated with those EDD checks themselves.

But here’s something we also understand: operators care (a lot) about acquisition. Here’s one entirely painless, zero risk way to add new customers to your business.

Learning from elsewhere

One last observation: nothing described above has not been done before.

In the last couple of years, the world of commercial lending has seen a move towards decisions made against reality (actual financial data) rather than guesswork (credit ratings). A key driver of that shift has been the desire to stop rejecting business on the back of lagging, inaccurate data or ‘thin file’ cases.

At the same time, it has become almost standard practice to ask for financial data, and not only when it comes to lending. Anyone renting an apartment in 2022, for example, can expect to be asked to share bank statements.

As Open Banking increases in popularity, and consumers see sharing such data as a simple fact of life, it is time for gambling operators to get smart when it comes to measuring financial vulnerability at registration.