Does your compliance team realise how much money is at stake?

Picture the scene. 

You are a highly-paid executive at a leading UK gambling operator. Among your responsibilities is ensuring:

  • That customers are retained as long as possible
  • That your business maximises the lifetime value (LTV) of those customers, and 
  • Captures the highest share of wallet possible

This isn’t an unusual position to be in. Indeed I was in it myself during a former life (without the ‘highly-paid’ bit). Every well-run gambling business should have someone with their eye on these numbers.

But here’s the extraordinary thing:

Today, in 2023, these people lose 85% of their very best customers to affordability and AML checks, and they do absolutely nothing about it.

I’m not joking. 

We have spoken to almost every compliance team in the country. We’ve spoken to plenty of C-suite and innovation officer types too. But the one person who is never in the room is the one person who should be: the person responsible for customer churn and LTV.

It’s not an excuse, but I can think of three possible reasons to explain that absence:

  1. They see conducting affordability checks as a ‘compliance’ issue and don’t have the authority to purchase ‘compliance’ products anyway
  2. They see customers lost to compliance as an ‘act of God’ over which they have no influence
  3. They weren’t invited to the meeting and remain in ignorance about the whole business

Like I say, they are not excuses. 3 is a sackable offence to be honest: “I didn’t notice or care that I lose about 9 in every 10 of my most valuable customers when they are asked to complete an affordability or AML check” are not, ever, words that should come out of the mouth of a retention manager. 

But let’s for the sake of argument take the first two reasons, and look at how someone who DOES care about the millions of pounds in revenue that their organisation loses every year might try to overcome them.

It’s the compliance department’s job

Organisations, and particularly large organisations, aren’t always the most sensible or efficient entities in the world. And here we bump into a good example of this. Although our theoretical retention manager is losing 90% of her customers during enhanced due diligence (EDD) checks, she doesn’t ultimately have control over how those checks are performed.

The flip side of this is that most compliance departments, with the best will in the world, are not motivated, or incentivised, by retaining customers. Their job is to meet their regulatory obligations, to avoid fines and worse, and to do so while spending as little money as possible. 

So if it isn’t entirely obvious, the job of the retention manager is to change that dynamic. Speak to the compliance team. Speak to the individual that the head of compliance reports to. Speak to the CEO if necessary. What is absolutely essential is to get the conversation started, to ensure that the right people understand just how much of a hit the business is taking. 

Because once that number of 85-90% is properly understood by the right people, you can be absolutely sure that things will change. The aim, as always, is to change the incentives. Ensure that someone, somewhere, who has authority over compliance, understands just what is at stake, and becomes invested in moving that number.

Which leads nicely on to point 2.

Is churn at EDD an act of God?

Short answer: no.

Longer answer: you can see why people think this is the case. Compliance checks are just ‘something we have to do’ and ‘customers hate them’. As a result, we lose most of them the moment we ask for documents. Etc etc.

Indeed, you can even hear in the language an entire industry telling their own customers that affordability checks are a painful, pointless waste of time! No wonder those customers then run away screaming when they encounter them in real life. What an absurd, idiotic self-fulfilling prophecy.

Here’s the truth: whilst plenty of customers don’t like sharing financial data, precisely how that process takes place makes a huge difference to the churn rate you will experience. 

I mean, it stands to reason. Consider how this process usually looks today:

  1. A customer hits an EDD trigger meaning a check has to take place
  2. They get an email or a phone call from the operator asking them to send in bank statements
  3. They have to go and download these statements from the bank, all the time wondering whether this is a good idea or not
  4. After obtaining the statements, they send them into an email address and wait
  5. They wait a little longer, thinking “maybe I should open an account with another bookmaker while this is going on?”
  6. Finally, a compliance officer gets back to the customer to explain that they need the statements from another account, as the one provided does not appear to show any salary
  7. Go back to step 3, and repeat until somebody dies

Compare that with how this process should be done:

  • Customer is requested to complete an affordability check within an operator’s site, or via a link provided in an email
  • Customer connects bank account in two clicks and about 30 seconds - without even time to think
  • Customer carries on with their life

Which do you think is most effective when it comes to retaining customers?

In conclusion, let me be really clear. Churn rates at EDD are not an act of God. They are not solely the concern of the compliance department. They are costing you millions of pounds a year, and you can and should do something about it.

A good first step would be talking to ClearStake. Drop us a line here, we can make everything better.