Industry reaction: How will the decision to ban credit card gambling affect UK operators?

The UK Gambling Commission yesterday confirmed it would ban credit card use in all online gambling from 14 April 2020.

The regulator claimed the ban was to address the significant financial harm caused by gambling on such cards and to help protect problem gamblers.

However, the prohibition was opposed by several operators during the consultation process, on grounds it would drive consumers towards less reputable forms of lending. The industry also monitors credit card gambling to help identify at-risk customers, which will no longer be possible.

Below, Richard Williams of Keystone Law, Melanie Ellis of Northridge Law LLP, Peter Murray of Alexem Services and David Clifton of Clifton Davies Consultancy share their thoughts with EGR Intel on how this ban might impact operators:

EGR Intel: Do the changes go far enough?

RW: The proposals restrict payment by credit card through a money service business (e-wallet) and I think that’s about as far as the Gambling Commission could go. The practicalities of e-wallet providers splitting gambling balances and non-gambling balances and operators differentiating between credit and non-credit e-wallet balances will be interesting to see in practice though.

PM: I’m not sure they could have gone any further! There is credible argument to say that removing credit cards was an overreaction simply pandering to the current political climate. However, once they concluded that ‘credit cards are disproportionately used for gambling by individuals who are experiencing harm’ then there was only going to be one outcome. The UKGC also note that it is not in itself a ‘silver bullet’ but that any harm brought about by its prohibition would be outweighed by the benefits. Clearly operators were not in favour of the idea, in part because they were also using at as part of the verification process (to have a credit card you are meant to be over 18) but the argument that they used credit cards as part of their RG/monitory process was never going to stick, primarily as there was no evidence they had used it this way in the past.

DC: There will be some who consider that the ban should have been extended to pre-paid cards and that it will still be open to those intent on funding their gambling by credit means to do so. However, the UKGC has clearly given consideration to these issues and is presently content to leave it to gambling operators and financial services to take a holistic approach to this in terms of overall affordability checks. This seems a suitably proportionate approach, but the UKGC will be keeping a careful eye on developments and nothing is set in stone.

EGR Intel: How will the ban affect revenues?

ME: Indications are that operators could expect to lose 3-4% of customers due to the credit card ban. This figure is based on a combination of the RGA’s research which found that 14% of online gamblers had used a credit card in the past year and research undertaken by 2CV on behalf of the UKGC, which found that 26% of those who had gambled using a credit card in the past year would stop gambling all together if their use was banned. It’s difficult to know whether this 3-4% prediction will translate to reality, or what the impact will be on total GGY, but it seems likely there will be a noticeable effect.

RW: Some have said it will wipe out a large proportion of their deposits, others say it won’t impact them a great deal. Not all credit card revenue will be lost though, so it will take time to assess the impact. Players will switch to debit card, loans and overdrafts to fund gambling.

PM: I think the UKGC’s view of usage as being between 5% and 6% feels about right overall although this will vary between companies. Short term it will reduce revenue with those choosing to use this method inconvenienced but longer term I think this will stabilise as the ban takes effect and customers find ways to work around it. One interesting aspect is how it will affect some of the operator’s key customers and biggest spenders, who may well use this method more widely. This could be the biggest area of pain for operators and could well be the area with the most negative impact.

DC: It would be unrealistic to expect the ban will have no effect whatsoever on operator revenues, but the relatively small number of remote betting and gaming operators (14) who responded to the consultation is an indication that purely commercial considerations were not at the forefront of operator minds. I have clients who initiated a voluntary ban on credit card payments well in advance of the announcement and I believe that there is a general acceptance that, in the present circumstances in which the industry finds itself, it would be inappropriate for operators to argue that the wrong decision has been made by the UKGC.

EGR Intel: The industry argued it used credit card gambling to help identify at-risk players. Was this a legitimate argument?

RW: I don’t think it’s a very strong argument to make that we know who our problem gamblers are because they use credit cards to deposit. Operators should maybe have been reviewing these accounts more closely and closing accounts where they were aware of issues due to reliance on credit cards. It was interesting to see that, of the operators who responded to the consultation, no operator supported the ban. Operators need to get on the front foot and pre-empt these restrictions before they are imposed. It might not be good from a business perspective, but unless the anti-gambling stance of the press and parliament can be mollified, even harsher measures may follow which could be even more damaging.

ME: There is a real concern that those customers who are experiencing problem gambling and currently using credit cards will turn to other forms of debt to fund their gambling, which will not be visible to gambling operators. The changes will not stop all of those suffering from problem gambling from getting into financial difficulties, as the 2CV research indicates that over a third of current credit card users intend to continue gambling with money they don’t have, for example by borrowing from a friend or family member, taking out a personal loan or even turning to an illegal loan shark. While the UKGC acknowledged that credit cards are used as an indicator that a customer may be experiencing problems, it did not find this enough reason to retain their use. Operators will need to reconsider the indicators they use and put a greater emphasis on total spend and patterns of deposit and play.

PM: I am really not sure of any reasonable argument to say that this will result in reduced awareness of problem gambling. Yes, using a credit card could be used as ‘flag’ that could be monitored but it was never going to be a strong enough point to swing the argument. It is true that operators used the use of a credit card as part of their verification process (you are meant to be over 18 to have a credit card) but it was never a particularly reliable or robust criteria.

DC: This line of argument was given fairly short shrift by the UKGC, who have not been persuaded that the loss of credit card use as a variable in risk detection algorithms is an adequate reason to continue to permit credit cards for online gambling. The UKGC has also pointed out that operators tend to use number of payment methods as a marker of harm in their harm prevention methods, rather more than ‘credit card use’.

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