Date: 09.10.2023

by Bartosz Burzyński

Last update: 09.10.2023 10:38

Tom Farrell, CMO at ClearStake: – Making compliance profitable

Let’s face it, most of us see compliance as a cost. One only has to look at some of the reaction to the UK Gambling Commission’s proposed changes to affordability checks in particular to see that attitude in action.  And whilst we’re being honest, perhaps that belief is entirely justified. The way ‘compliance’ is run in the gambling industry today, it isn’t hard to make the argument that it represents a whole lot of pain, and not much by way of upside. 

But the good news is that there is a better way. Fundamentally, we can reimagine compliance by doing two simple things, namely: accepting that regulation is part of doing business, and thinking clearly about how we comply with that regulation in a way that inconveniences our customers as little as possible.

Let’s talk about the first point. Gambling is not, by any stretch of the imagination, the only regulated industry in the world. Indeed, you wouldn’t need more than the fingers on one hand to list those industries that don’t have to comply with a regulatory environment of some sort.

The catering industry does not spend significant time and effort railing against food hygiene standards. Nor does international banking invest precious mental energy in a campaign against international money laundering laws. Gambling should be no different. Indeed, sensible regulation should be welcomed as the right way to build a sustainable industry. We should embrace the challenge.

And part of embracing that challenge is referenced above. If we think creatively about making regulation as painless as possible for the customer, compliance can – genuinely – add to top line revenues. Certainly, when compared to the situation we are in today.

Making it easy

Too many operators today make one or all of three mistakes: Seeing regulation as pain, and thus investing no time or effort into thinking about how to make it simpler and smoother for the customer; over-reacting to the regulatory environment in a way that hurts revenues; and failing to understand the commercial implications of their compliance function.

Let’s talk about each of those in turn

It isn’t surprising that operators don’t particularly like performing compliance checks, certainly not those that require customers to share real financial data. But when that dislike becomes a refusal to actively engage with the process, and instead just see it as a pain that might go away at some point in the future, there’s a problem.

Human beings do this all the time but organisations should not. And let’s be clear, the reason that upwards of 80% of customers churn when a gambling operator asks them to complete an affordability or source of funds check is simple.

Those operators haven’t made any effort to make the process easy

So, as a first step, start caring about compliance in terms of the customer journey. Focus on the 80% and figure out how to perform checks in a way that doesn’t irritate customers and retains as many of them as possible. It can be done, as we have seen CearStake customers more than double the number of customers retained during Enhanced Due Diligence checks.

The second point is perhaps more subtle. Clearly operators want to stay on the right side of the regulator. In order to do that, and perhaps with a justified lack of faith in the data provided by credit reference agencies, many apply flat spending limits to customers that are well below the level at which the regulator expects decisions to be made based on real financial data.

This probably makes sense in the current climate. But it does have commercial implications, specifically around limiting potential revenue from customers. The good news is that just as with the checks above, we can and should, make it easy for customers to adapt these limits and allow those who can afford to spend more to do so.

Simply by making the option available (from the moment of registration), and ensuring the process is simple, fast and secure, operators are able to see a significant increase in the number of their customers who enjoy personalised spend limits based on the financial data they are willing to share. We’ve seen five times more customers complete these journeys when they are moved from pen and paper to Open Banking – and the commercial implications can be significant.

The structural issue

Connecting both these issues with the third point on our list is a simple but often overlooked fact:

With many operators, nobody who cares about the 80% of customers who churn when asked for financial data has the ability to do anything about the problem.

What does that mean? Well, put simply, retention and P&L are often an entirely different department and chain of command to compliance. Most compliance teams are not compensated based on how effectively they reduce churn, and most people compensated on reducing churn are not responsible for compliance.

There are perhaps good reasons for this. We’re not suggesting operators change their corporate structure based on this

article, certainly not without considering the implications carefully. But at the same time, it is imperative to make sure that someone who does care about that number has some sort of influence over the compliance function of an organisation.

Protecting players is important. But making money is why businesses exist, and we should not apologise for it. The goal, as always, is to maximise revenue whilst minimising risk.

Think carefully about how you can make that happen – and make compliance profitable.

Related posts