Should you gamble on amber?

Tom Farrell
November 30, 2023
4 mins

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 And they are doing so based on information that may be inaccurate, out-of-date, or just plain irrelevant.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