Open Banking and gambling regulation: will it work?

OK, it is only a leak. But the details published on Earnings & More today certainly feel authentic. The proposals are broadly in line with what the industry expects, and the language feels right. There is still time for things to change of course, but the general direction is by now apparent.

The question now is what does it mean, and what plans do operators need to make in order to survive (and thrive) in this new reality? With an unapologetic focus on the affordability side of things, here’s our take on what happens next.

Firstly there is clarity on the need for passive checks when any customer passes through a loss of £125 a month. But these are explicitly called out as passive checks (CCJs, credit data etc). Based on our conversations with operators, this is unlikely to have serious implications for the industry: most do checks of this nature during or soon after registration already.

Things get more interesting when we get to the checks for higher-spending players, or what we might call enhanced due diligence (EDD) checks. The key passages in the piece are below. First on when EDD affordability checks will be required:

“Higher level of spending affordability checks: £1,000 in 24 hours or £2,000 within 90 days.”

And second on what those might look like: 

“Largely frictionless: Again, according to what we have seen this is where “there should be more detailed consideration of a customer’s financial position”. The intention is that these checks should be “largely frictionless for customers” and conducted online via credit reference agencies or via other means “such as open banking in the first instance”.

Let’s look quickly at each of these in turn.

Levels of spend/loss

I suspect most operators will be breathing a quiet sigh of relief about the numbers being quoted. A loss of £2,000 in a 3 month period is probably not miles away from where ‘enhanced’ affordability checks kick in today, and indeed customer due diligence is already mandated at this point. 

Even allowing for the slightly more stringent requirements for new customers (on which more below), these are not numbers anywhere close to some of the scare stories we have seen over the past year or so. And just having a number at all will in many cases give operators the certainty they need to plan for the future and put in place systems they know are compliant.

What affordability checks might look like, and where Open Banking fits in

Here things get significantly more interesting. 

Without wanting to sound overly critical, to me there feels like a central contradiction between the desire for “a more detailed consideration of a customer’s financial position” and checks conducted via “credit reference agencies”. 

I may be wrong, but I suspect that in the transition from theory to practice it will be understood that credit checks really are not good enough to make affordability decisions relating to losses in the thousands of pounds. So that leaves us with “other means, such as Open Banking in the first instance”.

Well, this is what ClearStake does, and we are at present (to the best of my knowledge) the only enterprise-ready Open Banking solution that was built specifically for the gambling industry. So clearly this looks like good news to us. But what does it really mean for operators?

My sens