Posted 27 August 2024 by Helen Rhodes

Our approach to piloting financial risk assessments

The issue of how to identify and support high-spending remote gambling customers who may be in financial difficulties is one that the Gambling Commission has repeatedly looked at over recent years, including through consultation. 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 Government’s Gambling Act Review. Following this, we proceeded to a consultation on specific proposals. These proposals, which we published in May, were not on affordability, but on a more targeted approach to identifying financial risk and difficulties.

We want to tackle cases where customers have been able to gamble large amounts without any checks or support where it was later identified that this led to significant harm. But we are proceeding cautiously to test whether and how financial risk assessments could be introduced in a way that supports high-spending customers in financial difficulties but also supports a frictionless customer journey for the vast majority of customers.

In May, we announced that our next step would be to conduct a pilot with the largest operators and credit reference agencies. This blog sets out more details about what is being piloted and how we will assess the findings alongside other evidence and information to make decisions on whether and how to proceed.

How the pilot will work

As we have said before in an earlier blog post on Financial Risk, it is not a ‘live test’ – no consumers will be affected. Instead, we will run a pilot of how assessments would work using real data all the way through the process, but not take action on it. During a pilot and if introduced, financial risk assessments would not affect a consumer’s credit rating.

The pilot will last 6 to 7 months. The largest remote gambling operators will work through three stages initially looking at historical customer data and then considering current data. We are testing whether high spending customers who are in significant current financial difficulties or severely degrading financial difficulties can be identified – for example, this means people who might be in significant arrears, high levels of indebtedness, or have multiple missed payments.

We are testing how operators can be given limited information to understand how severe these financial difficulties might be, in order to take action to support the customer. 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. Where no financial difficulties are identified, the operator would not need to take any action.

At each stage, we are testing at least one of the success criteria. We expect each stage will give us different results. For example, it is likely that a smaller proportion of accounts would be able to receive a frictionless assessment when using historical data. The criteria we are assessing are:

1. Frictionless part 1

If the assessment were to be applied to the highest spending accounts, what proportion of these accounts could get a financial risk assessment from credit reference agencies? Is this amount in line with the estimates of the 2023 Gambling Act Review White Paper (opens in new tab) which estimated that approximately 80 percent of accounts that undergo a check would be able to do so? Is the ‘unmatched / thin file’ proportion of accounts approximately 20 percent of those accounts that undergo a check?

If the thresholds were set at those proposed in the consultation, this would mean that approximately 3 percent of accounts would be checked. We are testing whether 80 percent or more of that small proportion being checked would be frictionless. Overall, this would mean that the gambling businesses can ensure that the vast majority of accounts could have a frictionless customer journey.

2. Frictionless part 2

How quickly could credit reference agencies process an assessment and return a score or Red, Amber, Green (RAG) rating to gambling operators? Can credit reference agencies return the score or RAG rating to gambling operator within minutes for matched customers? To what extent does latency affect the frictionless process?

3. Data relevance and accuracy

Is using credit reference data meaningful for understanding of an individual customer’s current or imminent overall financial risk and financial vulnerability? How does this data compare to information that is otherwise available to operators about a customer’s individual financial vulnerability? Can Current Account Turnover (CATO) data add additional relevant insights on a customer’s individual financial risk? If so, in what circumstances? Could CATO data in some circumstances negatively impact the accuracy of an overall financial risk assessment? If so, in what circumstances?

4. Implementation issues

• how could the data be presented to operators to help understand the level of financial risk/ vulnerabilities associated with individual customers? 
• how could operators build financial risk assessments into their overall customer interaction processes? 

The pilot will provide insight to help us decide whether to proceed with the implementation of frictionless Financial Risk Assessments and, if so, how.   But these decisions would also be informed by wider considerations of data, evidence, consultation responses and our consumer research.

If financial risk assessments are introduced in the future, we are committed to longer term evaluation which we have discussed in our March blog on this topic. This would enable the Commission and the Department for Culture, Media and Sport (DCMS) jointly to consider if the policy is delivering the intended outcomes for consumers in a live environment.