A credit to the Commission?

16 March 2020

The ban on the use of credit cards to fund online gambling is due to come into force from April 14. Jake Pollard examines what sort of impact it is likely to have on the industry – and on problem gambling rates

From April 14, the ban on the use of credit cards for online gambling is another regulatory signpost around which the UK industry will have to manoeuvre.

The ban, announced in January, joins a range of other responsible gambling measures being put forward by the Gambling Commission and operators, both of which are feeling the heat from anti-industry politicians and media.

The British regulator said it had already decided to take action on credit card gambling when it launched the consultation on the measure. This, it said, meant it was a question of “what action should be taken to protect consumers and minimise risks, rather than whether any action should be taken”.

Clearly a consultation process is important and necessary when assessing regulatory measures. But the Commission’s admission that it had already decided to take action against credit cards being used for gambling gives an insight into its thinking on this matter.

In addition, if the Commission already knew it was going to pass a ban on gambling with credit cards, it adds to the impression that the consultation was only there to confirm its viewpoint.

In response, the Commission would point to the evidence it gathered, which showed that credit cards were disproportionately used for gambling by individuals who were experiencing harm. 

Harm levels rise with credit cards
Among the 24 million adults gamblers in the UK, 10.5 million play online and an estimated 800,000 consumers use credit cards to gamble remotely (credit card payments are not allowed in land-based casinos or bingo clubs). 

As part of a survey of 2,000 adults carried out for the credit card ban (about 150 of whom reported using a credit card to gamble online), the Gambling Commission found that:

  • 22% of credit card gamblers were problem gamblers 
  • 25% were experiencing moderate levels of harm; and
  • 20% experienced lower levels of harm. 

The regulator also found that gamblers using credit cards to fund their play were not put off by the fees that are applied to cash advances, which is how credit cards are classified. Those higher than usual charges can quickly accumulate. 

In terms of optics, the ban also plays well to all stakeholders (pro- or anti-industry). The Commission argues that it is another measure to increase player safety and prevent at-risk gamblers from falling further into debt by funding their gambling through credit cards, and the heightened interest rates that come with them. It’s hard to disagree.

The Betting and Gaming Council (BGC), the trade association for the GB gambling industry, declared its support for the ban and pledged that its members would go one step further.

“We will implement a ban on credit cards and indeed our members will go further to study and improve the early identification of those at risk," said BGC chair Brigid Simmonds. 

"The use of credit cards were previously used as a potential marker of harm which might lead to further intervention with customers.”

How significant the measure will be in helping reduce overall rates of problem gambling is debatable, however. This is because the majority of online gambling deposits are still made via debit cards and at-risk or problem players could try to fund their activity through payday loans, another product with very high interest rates. 

Acknowledging that possibility, the Commission said: “We expect a reduction in harm resulting from a prohibition on credit cards to outweigh any harm from a minority of customers substituting to payday loans or other forms of borrowing. 

“It will however be important for gambling operators and financial services to continue to make progress in identifying consumers at risk of harm from using borrowed money other than credit cards to fund gambling, and to mitigate those risks.”

Payment services provider Paysafe, owner of e-wallet brands Skrill and Neteller, said: “We are anticipating minimal impact as credit card deposits into UK customer wallets which get used for gambling payments only represent a small proportion of total wallet deposit volume.”

When it comes to detecting and stopping credit card payments into e-wallets, Paysafe added: “We are able to make adjustments to our wallets services to effectively prevent credit card deposits being used to make payments to UK-licensed gaming operators.”

While service providers such as Paysafe have prepared for these measures for some time, they are also in no doubt as to where ultimate responsibility lies when it comes to reducing rates of problem gambling. 

“We support ongoing efforts to ensure customers gamble responsibly, although this is a topic which gambling operators are probably better placed to comment on.”

iGB contacted a number of operators for comment on this topic. They all referred back to the BGC statement praising the measure.

It is however interesting to note that the industry was opposed to the measure when it was first set out by the Commission. Along with financial and payment service providers, it pointed out that the ban would not address the underlying causes of harm. 

Responsibility always lies with the sector
The Commission again acknowledged this point. It argued that despite not directly tackling the underlying causes, it would reduce risks of harm by preventing players from gambling more than they can afford to repay.

“[At] the very least, it will add levels of friction to the process of gambling with borrowed money (so) that the rate of financial loss is slowed down and harm is potentially curtailed,” it said.

Its research of outcomes from a credit card ban also found that:

  • 42% of lower risk credit card gamblers said they would use their debit cards instead in the event of a ban; and
  • 41% said they would stop gambling completely.

New research also showed that 50% of higher-risk credit card gamblers would either stop gambling or use their own available funds if they could not use credit cards to gamble.

Further study into the matter found credit card gamblers were highly engaged and tended to be less aware of the risks of gambling. The higher fees presented by credit cards did not deter them, as their usage patterns were often embedded in their habits. 

Other key findings included:

  • 82% of credit card gamblers were not fully aware of the fees and interest accrued through credit card gambling transactions; and
  • Three-quarters of all lower risk credit card gamblers are likely to be deterred from using their credit cards for gambling having now been made aware of the charges they might incur.

As David Clifton (pictured below) of industry consultancy Clifton Davies points out, credit card payments have always been forbidden in land-based casinos and bingo halls.

Few would suggest it’s had much of an impact on these sectors. As such, he says, the online sector will not see the sort of substantial impact that some have predicted.

But, he says, just as important will be the fact that “banks and other financial institutions are playing their part in protecting customers from encountering problem gambling issues. 

“This means confidence and trust will develop and some degree of common ground can be found” between all stakeholders. This should lead to more collaborative projects, reduce in-fighting and benefit the sector across the board. 

For all the headlines the credit card ban has attracted, its effect on the sector is not likely to be significant. Industry observers have also questioned whether the smaller operators, under bigger financial pressure than UK majors such GVC or William Hill (which has predicted a £10m decline in online profits) will adhere to the ban.

The Commission said regardless of size responsibility rested with all licensed gambling operators and e-wallet providers to prevent credit card payments being sent to merchants (operators).

The onus as always is with gambling operators to ensure the new measure is respected. As part of its ‘Strategy 2018-21’ project, the Commission’s priorities are to protect the interests of consumers, raise standards in the gambling market and improve the way it regulates the sector.

The credit card ban is one of the measures it hopes will help achieve those goals. 

It is also of a par with the regulatory pressure being exerted on the industry at the moment. How much actual impact it has on reducing rates of problem gambling is another question.