What operators need to know about the UKGC's affordability changes

Published: Tuesday October 29, 2019

Our Gaming Director, Alex Lafferty, talks to EGR Global about the UK Gambling Commission's latest changes to its License Conditions and Code of Practice.

Originally published in EGR Global


The UKGC’s changes to its Licence Conditions and Codes of Practice (LCCP) this month are an effort to make gambling “fairer and safer.”

With a focus on customer interaction and gambling-related harm, the changes aim to help operators better understand wealth and protect vulnerable people.

The key consideration for operators is affordability. They’ll need to identify and assess customer affordability in more detail than before and prove that intervention has taken place where necessary.

Why is affordability such a hot topic?

The changes have been on the cards for some time, and this month could just be the beginning of the UKGC’s focus on affordability. It’s fair to say that operators have known for a long time that affordability governance from the UKGC would be tightened, and further measures would not be an option, but a necessity.

In my view, the amendments, alongside the 2018/19 Enforcement Report, are the start of the affordability governance process. Operators are now making decisive moves to improve their affordability controls and implement solutions where they can.

Are existing affordability solutions sufficient?

Manual affordability checks create friction in the customer experience. Asking for bank statements, P60s, and tax returns makes the customer more likely to stop betting and move to another operator.

Traditionally, however, there have been no automated solutions and this has left operators with no alternative.

Some look to Open Banking as an incoming technological solution but it doesn’t solve the problem for the majority of the customer base because it’s consent-based. Also, credit bureaus have historically been restricted from releasing CATO (current account turnover) data or other credit-based data for the purposes of internet gambling.

Exclusively using non-subject-specific data, such as postcode-driven Geo Affordability, is also not the solution because it doesn’t give operators the full story of an individual.

While Geo Affordability has a role to play for early adopters it is important to take a layered approach, combining postcode-level data with subject-specific data.

The use of CATO data is critical and the stance on releasing this type of data to gaming operators is changing. Combining it with official salary income data, while also layering in Geo Affordability data, is a step in the right direction.

Default checks vs. triggered checks

It remains to be seen whether affordability checks will need to be conducted on all customers at the point of registration by default.

With all regulation so far indicating a general move towards affordability checks during onboarding, I expect larger companies will get ahead of the game and implement them sooner rather than later.

However, second- and third-tier operators may well rely on the introduction of a threshold-based approach until the LCCP dictates otherwise, only carrying out affordability checks where a customer meets specific deposit-based criteria.

What is a ‘reasonable amount’ per customer?

The UKGC’s Enforcement Report addresses the subject of disposable income using ONS data and YouGov poll data. It says the average UK consumer’s disposable income is between £125 and £499 per calendar month.

We believe that the UKGC initially considered the introduction of mandatory deposit limits for all customers, starting at £500pcm. To go beyond this threshold, operators would have to prove sources of funds or at least have customers “opt in” to increasing their affordability limits further.

After consultation between the RGA and key operators, I understand an agreement has been reached to implement data and find alternative solutions, rather than imposing a mandatory blanket affordability threshold on all customers. It’s good news for operators as a blanket limit for all customers would have had significant detrimental implications for the industry, and it seems a more pragmatic approach is being set out by the UKGC.

Any legislative changes will be implemented to protect high-risk customers, which the UKGC classes as those between 18 and 24 years of age.

Geo Affordability data and postcode input

Geo Affordability data has been proposed as a potential solution, but it isn’t necessarily an accurate measure.

While it can indicate potential wealth, certain places, like London for example, have multi-million pound properties in the same area as social housing, and so postcodes can’t be relied upon for an accurate reflection of customer wealth.

Why CATO Data could be the answer 

Linking Geo Affordability data with more granular financial information such as CATO would ultimately drive a more informed decision.

If we take the idea of subject-level-specific data even further, to include Income Verification, debt to income ratio and credit worthiness, we start to build up a much more accurate customer affordability profile that far out reaches the benefits of Geo Affordability data alone.

When should operators take action?

Tighter and more prescriptive guidelines could arrive as soon as mid to late 2020, and an affordability-based consultation from the UKGC is likely to be the first point of progress.

The evolution of affordability solutions

Current requirements around affordability are not prescriptive which means there is no one-size-fits-all solution to the issue. As such, solutions will need to evolve alongside regulatory requirements imposed on operators.

Looking ahead

The affordability assessments that come into play at the end of October are just the beginning. Requirements will only become more stringent with time.

Affordability has been a key customer metric for industries such as finance and insurance for many years, so it is fair to say that the online gaming space is playing catch up.

The UKGC will focus on customers at most risk, such as those with low income employment, issues with CCJs, bad debt, and pay day loans.

Safeguarding these players will take more than just Geo Affordability data. We will pursue a more nuanced and sophisticated approach that layers Geo Affordability data with individual CATO and credit-derived data, alongside an element of geo-location profiling.

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