Financial risk checks: What we know and don’t know about the Gambling Commission’s affordability rebrand
In May the Gambling Commission announced plans to implement “light-touch” financial risk checks for players in a two-part pilot scheme commencing today (30 August).
The checks will be triggered when a player’s net monthly deposit hits £500 in the first light touch check, involving the UK’s largest operators and credit reference agencies. A second phase from February 2025 lowers the net deposit to a threshold of £150 or above.
The plan is simple; the Commission aims to test whether it can quickly and efficiently identify three risk factors among high-spending players:
binge gambling
significant unaffordable losses over time
particularly financially vulnerable customers.
It’s a three-stage process that will not have any impact on customers at this stage, Gambling Commission director of major policy projects and evaluation Helen Rhodes claims. Initially it uses historical customer data, before moving to current data, aiming to identify players in significant arrears, high levels of indebtedness, or who have multiple missed payments.
Affordability in the UK
The checks, whether branded affordability checks or the narrower definition of financial risk assessments, are controversial, to put it bluntly. Debate has centred on concerns of undue friction for customers and racing in particular is vocal about the potential impact. The Jockey Club estimates the checks could cost racing more than £250m over the next five years.
The topic dominated responses to the Gambling Act review white paper consultations, Gambling Commission CEO Andrew Rhodes told a department for culture media and sport select committee in September last year.
However there are signs of the industry coming to terms with the checks. Even the British Horseracing Authority (BHA) this week told the Racing Post it was “encouraged that the pilot is not a live test” after assurances from the Commission that bettors would not be affected.
“Most of the big operators seem fairly relaxed about [the checks],” Dan Waugh, partner at Regulus Partners adds. “Most of them have been doing these things already. And it’s not a bad thing that we’ve got some degree of standardisation across the industry.”
However the BHA also warned of a lack of clarity around conditions for the test launching today in the Racing Post. “The blog however raises several questions, including about what spending thresholds will be tested during the pilot phase,” it wrote. “It is therefore important that the commission provides more detail on how the pilot will be evaluated including how success will be measured and by what metrics.”
So as financial risk checks finally become a reality, is the industry prepared, and will this pilot actually fulfil the Commission’s pledge of ensuring a frictionless and fair scheme?
Confusion and uncertainty around financial risk checks
The BHA is not alone in its concern about details of the pilot being thin.
Both Waugh and senior associate at Bird&Bird senior associate Lucy Paterson believe there is a lack of clarity on what operators should do with the information collected on players. Currently there is no real guidance on what kind of intervention is required if any red flags appear, they say.
“Say you find somebody with a county court judgment for debt, what you do with that information? That won’t be standardised across the sector,” Waugh points out.
The Commission expects operators to utilise the data and consider how it can help build out their player risk management strategies.
In Helen Rhodes’ 27 August blog post, the Commission said the financial risk checks pilot would “test” how operators can understand how severe players’ financial difficulties might be given limited information.
“This would potentially allow operators in the future to look at other indicators of harm they have and tailor support to the customer ranging from reducing marketing, encouraging the use of deposit limits, right up to ceasing the customer relationship,” Rhodes wrote.
Do we have all the information?
This is facilitated by the Information Commissioner’s Office (ICO) clarifying in July 2023 that credit reference agencies can share personal information with gambling operators to enable financial risk checks under the General Data Protection Regulation (GDPR). That says the information can be shared. It doesn’t set out how it should be shared.
“In accordance with GDPR, the information that is shared must be limited to what is necessary,” ICO executive director of regulatory risk Stephen Almond said at the time. What is considered “necessary” however remains opaque.
“We just don’t have the technology to enable a single model [for sharing data] across all operators. [Operators] feel they are in the dark about that,” Paterson says. “The changes needed to update operators’ policies and processes for the pilot have been a priority because there are so many unknowns.
“The hope for clients is that the pilot provides some clarity, or they realise the technology won’t work and it goes away.”
The history of affordability checks
The Commission first approached the concept of enhanced checks in a 2018/2019 report on enforcement. It referenced YouGov survey data that suggested most of the UK’s population over 18 years old had a monthly disposable income of between less than £125 and £499.
The data, it said, showed “operators were at risk of not understanding whether customers are spending an affordable amount or whether the money is from a legitimate source”.
The concept resurfaced in the UK department of culture, media and sport’s (DCMS) Gambling Act review and subsequent white paper. From there affordability was placed at the centre of its proposals for overhauling the gambling sector.
Parliamentary debates followed in February and the industry expressed fierce opposition against the implementation of additional affordability checks. Industry arguments claimed financial risk checks could have serious financial implications on the wider sector and drive players to the black market.
Financial risk checks and affordability checks: What’s the difference?
The Commission appeared to distance itself from the term ‘affordability’ after it announced the new measures. “These proposals were not on affordability, but on a more targeted approach to identifying financial risk and difficulties,” it said on 27 August.
“This started with an open call for evidence on the topic of affordability. Building on and making use of the responses to the call for evidence, a narrower ‘financial risk’ topic was then considered as part of the government’s Gambling Act review.”
Could the Gambling Commission be seeking to rebrand the concept after initial discussions were met with such strong opposition?
“The Commission claims this is nothing to do with the affordability and the financial vulnerability checks are entirely different,” Waugh says. “But I’m not sure I’ve met anybody outside of the Gambling Commission who thinks that’s the case.”
Are players losing their freedom?
Concerns over the financial risk checks infringing on players’ freedom to bet were raised in the house of commons, voiced by now-former Conservative MP Philip Davies. He told MPs the proposal was “completely unacceptable” during a parliamentary debate held on 26 February.
“It is unacceptable that the government, the Gambling Commission and the bookmakers will basically, between them, decide how much each individual punter can afford to spend on their betting and the punter gets virtually no say whatsoever,” he said in February.
The betting public appeared to share Davies’ view. A survey conducted by the Gambling Commission in 2021 found 77.6% of a 12,000 person survey sample believe businesses shouldn’t be required to assess gambling affordability for customers.
Of that number, 64.4% cited individuals’ freedom, while 61.4% highlighted privacy concerns. The data was released following a freedom of information request by Regulus Partners, after the Commission only released a small sample when it released its response to the financial risk check consultation.
Similarly, many of the respondents to the regulator’s 2023 consultation disagreed with the principle of affordability and the risk of losing their freedom. Some even threatened to move their gambling to unlicensed sites.
An unprecedented approach?
“It’s unprecedented,” says Waugh of the checks. “There’s no other area of consumer activity where you’re required to undergo tests to see whether you can be allowed to spend your own money.
“Similarly, we could put limits on every automobile so they can’t drive past the speed limit. That might have some benefits in terms of crashes, but it involves tradeoffs against free will, privacy or autonomy.
“At some point players will find something else to do outside of gambling. They might find a way to get what they need in the illegal market, or by some other mechanism,” he warns.
Could the sector be setting a precedent on capping people’s spending that may be followed by other industries? Waugh thinks it’s possible.
Signs of growth
Despite these worries some operators are bullish their UK businesses will return to growth after a tough few quarter saw revenues hit hard by tightening regulations. Rank Group and Entain both pointed to green shoots in the second half of the year and beyond in their recent trading updates, for example.
The rollout of the financial risk checks pilot does, at the very least, move towards providing some certainty for operators. Years of debate and delay to the reform plans left operators in limbo, which limited UK investment and hiring, as the 2023 iGB-Pentasia Salary Survey noted. Now most of the Gambling Act review’s measures have been priced in, does that mean operators will be able to grow?
“The DCMS modelled a revenue impact from these incoming regulations,” Waugh says. “But there is a question around whether the industry can reduce losses but still grow. The idea here is actually to stop excessive losses by a minority [of high spending players].
“If you saw a slight increase in activity from the majority of players then you could in theory see growth offsetting [those losses].”
Light touch avoids draconian measures
Paterson insists it is too early to know what the potential financial impacts of the checks will be.
Ultimately she acknowledges the introduction of “soft” measures like light touch financial risk checks are beneficial to the sector. After all, other markets face “much more draconian measures”.
“My view is if we can improve consumer protection with these lighter touch measures we can avoid those tougher measures further down the road,” Paterson says.
“I think a lot of operators are happy to have this clarity from a business perspective and the set thresholds to implement into their policies, rather than a lack of clarity around where the checks should be carried out.”
