Should you gamble on amber?

A recurring theme in most of the pieces we publish on this blog is that operators are leaving money on the table. We normally look at that from the perspective of the 80% of customers who are never seen again when asked for financial data during enhanced due diligence (EED) checks. But that is only part of the story.

Most operators nowadays run simple checks soon after registration, usually based on data supplied by credit reference agencies. These are the same early-life checks spoken about in the recent whitepaper, and typically identify common red flags (bankruptcies, court judgements, poor credit history and so on) and enable the operators performing them to set limits on accounts accordingly. 

In most cases a simple traffic light system is applied:

• Green means ‘go’, either up to the operators own default spending limit for that customer type, or to the point where EDD checks are necessary for affordability or money-laundering purposes
• Amber means ‘proceed with caution’: usually to a lower spending limit (often significantly lower) that prevents that customer staking in a way that might be deemed a risk
• Red means ‘stop’. This isn’t always the case, but I suspect for the majority of operators it is. When an operator sees red, that business will be turned down and the account effectively closed.

What this means, of course, is that operators are turning away revenue. They may be doing so with the very best of intentions, and they may feel that it is their only real alternative, but nevertheless, that is what is happening. And they are doing so based on information that may be inaccurate, out-of-date, or just plain irrelevant.

But there are other alternatives. And it probably won’t surprise you to learn that Open Banking checks, with their presentation of real, accurate and meaningful financial information, are first among them.

So what’s wrong with the traffic light?

To answer that question, let’s look again at the ways in which these decisions are arrived at. In addition to some of the data discussed above, there is also the possibility of looking at job titles, postcodes and estimated salaries (an approach the Gambling Commission still appears to have an almost touching faith in). 

But these merely compound the problem. To give a few clear examples:

• Where someone happens to live does not give us much information about their income or wealth
• A missed credit payment 3 years ago is not a clear indicator of how much or little an individual can afford to stake today
• Even a bankruptcy in the past does not - in and of itself - mean an individual cannot afford to enjoy a bet today

I could go on, but hopefully it is obvious that there are limitations to these checks. And most importantly, when we take them as gospel we are in danger of too many false positives in the amber and red categories: individuals who have the means to bet but are prevented from doing so based on data that doesn not tell the full story. And those false positives mean revenue turned away by operators for no reason. 

Enter Open Banking

Not long ago operators were probably right not to do much when it came to following up with potential customers given a ‘red’ or even an ‘amber’ score. Asking for financial documents was time-consuming. Checking them even more so. And most customers didn’t bother responding anyway. Given the significant time and cost implications that would be involved in arriving at a decision based on real data, just saying goodbye to customers who didn’t look great at first glance was a fair call.

But all those objections no longer apply. Open Banking checks are fast and easy. They have a marginal cost of something close to zero. And solutions like ClearStake do all the maths for you - there is no time spent huddled over a bank statement with a calculator. When that is the case, doesn’t it make a lot of sense to look again? Spoiler alert: it does.

And let’s be very clear about one point: we can generate this additional revenue without any compromise around player protection. By basing decisions on real financial data what we are doing is ensuring that the limits we set are accurate. No more and no less.

So if you are still excluding customers who are rated as ‘red’ after an initial check, it’s time to rethink that strategy. ClearStake can make it easy to give them a second chance - and increase your own top-line revenue as a result. Drop us a line if you’d like to make it happen.

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