Affordability is broken.
Here's how to fix it

It’s time to admit we have an affordability problem.

Whilst operators - and regulators - understand the need to ensure every customer stakes within their means, the industry as a whole is incapable of making that happen.

And it is costing us money and damaging the reputation of the industry.

To name only some of the most high profile fines issued by the UK Gambling Commission in the last 2 years:

The whole process is broken. 

When customers register, we rely on what amounts to little more than guesswork to estimate what they can afford to lose. And when that customer passes a given deposit limit and a closer eye is required, we are still reading bank statements off paper before reaching a decision. In 2021.

As a result, operators spend huge amounts of money, irritate (and then lose) some of their most valuable customers: and as an industry we still fail to protect the people we need to.

Fortunately, all of that is about to change. Automated affordability through Open Banking is here. And there is no excuse not to change the way we work, save time and money, and protect every one of our customers at the same time. 

It’s our responsibility. As an industry, we can now take it seriously. Let’s do that.

The need for affordability

Most of us know that responsible, safe gambling is both good for customers and good for operators. That represents a welcome change from past attitudes.

To take one typical example from dozens, here’s Entain’s 2020 annual report:
We are determined to change the mindset of our industry, starting with our own Company. In 2020, we continued to work on making safer betting and gaming underpin everything that we do."
Meanwhile, regulators increasingly understand - and demand - that protecting ALL players should be at the heart of everything we do as operators. The only question should be: “how do we make that happen”? And the answer is “affordabilty”.
As an industry, we need clear, accurate and timely affordability reporting
Affordability is simple. It means ensuring that every single customer can afford to spend what they do when gambling. In other words, they are spending only disposable income on entertainment, and gambling well within their means. That’s what we all want. 

Unfortunately, as it stands today it isn’t what we get.

What’s wrong with ‘affordability’ today?

The short answer to this question is:

“We spend a lot of time and money to get inaccurate information that doesn’t actually protect customers in the way that it should.”

The longer answer is as follows.

Today, affordability and anti-money laundering (AML) checks look a bit like this:
Customer registers or deposits for the first time.
Operator verifies that customer’s identity and age, and may run some form of limited affordability check.
Customer hits a certain deposit limit such as £500 in a month
Operator runs an affordability check. This might involve the provision of bank statements, or simply more third-party checks.
Customer hits a deposit limit at which anti money laundering (AML) legislation requires a check (usually around £2,000 in a month)
Operator performs a source of funds check, that requires provision of bank statements and/or payslips. All going to plan, these may even be genuine.
All these processes have significant drawbacks. Let’s talk about them.

Firstly and most obviously, the third-party checks commonly used at stages 1 and 2 tell us almost nothing. At best, knowing someone’s address, credit score, and any court judgments that relate to them allows you to take an educated guess and nothing more. 

And regulators are starting to lose patience with educated guesses. Educated guesses are what lead to fines and reputational damage.

In the case of the more detailed checks - sometimes called ‘Enhanced Due Diligence’ (EDD) - we are closer to real affordability analysis. Or at least we are if we are looking at actual bank statements. But at what cost?

The typical EDD process is time-consuming for the operator and irritating for the customer.

Arranging for bank statements to be sent in by the customer, and then manually analysing these statements to establish source of funds and affordability, takes time. Time means people: One operator we spoke to has 30 people doing this job alone - at a cost of about £1m pa. 

Meanwhile, the customer has to manually provide statements, hope they are legible, and wait. Sometimes for a week or more. Remember, by definition these are your most valuable future customers. In many cases they hit deposit limits very quickly post-registration, and time is of the essence. The lost revenue from those who go elsewhere to avoid time-consuming compliance checks is almost incalculable. 

And independently of these issues, EDD tells us what is true only at one moment in time. But for affordability purposes, this information is almost useless. What happens if the customer loses their job the next day? Or takes on significant new loans. Or to look on the positive side of the equation, comes into money or gets a major promotion?

The truth is - we won’t know about it. And all of our decisions will be based on out-of-date information.

The solution: affordability through Open Banking

Here’s the good news: the ability exists today to deliver real affordability information, in real-time and with close to zero customer friction.

In less than a minute, a customer can connect their bank account online, and in less than five the operator’s compliance team can make a decision based on clear, accurate and meaningful affordability data. Or we can go further - and such decisions can be entirely automated. 

As a result, friction and irritation for the customer is almost entirely eliminated. And so is cost to the operator. The same applies, of course, to AML checks relating to source of funds.
Making affordability checks as easy as possible reduces churn of high-value customers.
The benefits of this approach go beyond the retention of valuable customers and huge cost savings, however. To name just a few more:
With meaningful affordability information collected and stored in a central repository, providing a clear audit trail for future regulatory checks.
Ongoing availability of financial information means the business can respond to changes in a customer’s circumstances.
Open banking can provide for instant player verification, removing the need for existing KYC processes at registration.
Accurate, timely data ensures that customers cannot lose money they cannot afford in a short space of time: which is of course the whole point of the exercise.
In short, this is the only real way to deliver fit-for-purpose affordability today.

Lastly, a word on Open Banking (two words that scare a lot of people). 

At ClearStake, we believe that Open Banking will be the standard way to provide affordability reporting within a few years. If you aren’t ready to evidence affordability for all customers via Open Banking by then, it may be too late to catch up.

But we also understand that Open Banking isn’t for everyone today. That’s why our platform enables customers to upload bank statements as before, and then automatically reads them and brings them into the same platform.

In other words, you still save time and money, and you continue to retain your best customers, even if that customer isn’t quite ready to adopt Open Banking. 

We’re ready to provide this service today. And we’re serious about making responsible gambling a reality, not an aspiration.

If you agree, let’s talk.
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