UK affordability checks: What will happen next?

In February, the Commission outlined the next steps for financial risk checks and at the start of May it announced what this would entail. The new rules covered a variety of areas, such as reducing the intensity and increasing consumer understanding of online products, options for direct marketing, age verification and personal management licenses, as well as affordability checks. Rules set out by the Commission are to be implemented in four stages until completion in February 2025, while Betting and Gaming Council (BGC) rulings, which have been jointly written with the UK regulator, is a voluntary financial assessment scheme.

These set of rules have been created ahead of the implementation of the UK Government’s White Paper. The BGC’s new voluntary industry code on Customer Checks is aimed at reducing the need to request private financial documents and one of the guidelines includes conducting risk assessments on those wishing to make rolling net deposits of £5,000+ ($6,390) monthly (£2,500+for those aged 18-24), and those wishing to deposit £25,000+ annually. In relation to the Commission’s rules surrounding affordability checks, these looked specifically at financial vulnerability checks and financial risk assessments.

On top of the changes, a pilot of frictionless financial risk assessments was announced, which is set to last around six months, aiming to prevent cases where customers can spend large amounts in a short time period without any checks. Customers will not be affected during the pilot to ensure the Commission can refine the data-sharing processes before assessments are rolled out live, with data coming from gambling companies and credit reference agencies. The enhanced financial risk assessments will only be introduced if the pilot proves they can be conducted in a frictionless way.

The light-touch financial vulnerability checks look at identifying financially vulnerable online customers and supporting those who are subject to bankruptcy orders, or those with a history of unpaid debts. These checks will rely on publicly available data and apply to those customers with a net deposit of more than £150 a month on gambling. Checks will initially come in at £500 a month from 30 August 2024, before being reduced to £150 a month from 28 February 2025.

The checks must be a public record information check and no further check will be required if one has previously been completed within 12 months. In a media briefing after this announcement from the Commission, which included Executive Director Tim Miller and Chief Executive Andrew Rhodes, there was confidence that these checks will be relatively easy to implement for most operators and, for some, may only require a few small changes. Richard Williams, Partner at Keystone Law and Tamsin Blow, a partner at CMS, have given their insights into these latest updates on the affordability checks, looking at the impact it may have on players, operators and the industry as a whole.

How will these new rules related to affordability checks impact operators?  

Of course, affordability checks will have some effect on the operators who will implement them, and Williams has emphasised the difference between the two: “So-called ‘light-touch’ financial vulnerability checks will not impact operators a great deal, as many will already be undertaking these checks for risk flags.

“Those that are not will need to incur extra expense and will need to modify their procedures so that they can take proportionate action where a risk is flagged – this does not mean closing accounts in all cases. Costings should not be significant for these checks and I expect them to be frictionless. Financial risk assessments with data sharing are a different matter, and it’s not known yetif these will work and will be frictionless.” Blow offered her take on the checks: “The new financial vulnerability check provides some measure of clarity for operators as regards the appropriate financial threshold for vulnerability checks.

However, the impact on operators is limited because the new Social Responsibility Code provision:

• Does not provide clarity as to the steps that need to be taken by an operator in response to the results of the vulnerability check.
• Does not replace any existing legal or regulatory duties. This means that operators also still have to comply with existing SRC 3.4.3 on customer interaction as well as licence conditions related to AML. The threshold for the financial vulnerability check is based on customer spend but under the existing SRC 3.4.3 operators also have to consider other potential indicators of harm: patterns of spend, time spent, gambling behaviour, customer led contact, use of gambling management tools and account indicators.
• Limits the financial vulnerability check to publicly available information, but operators must consider this together with all the other information they know about the customer and are permitted to use

Do you think the pilot will prove to be effective going forward?

On the topic of the financial risk assessment pilot, Williams stated: “It will cover the largest gambling operators and volunteers who wish to participate. This will not be in a live environment. I expect that there will be some humps and that this will not be plain sailing, but that is the reason for it to be a pilot. Whether these checks can be frictionless remains to be seen.” Blow added: “During the course of the pilot the Gambling Commission’s intention is that it will have no direct impact on customer journeys. The thresholds at which the financial risk assessments are to be carried out are yet to be determined by the GC and may be refined during the course of the pilot, so it is difficult to say how effective the output will be.  

“It is also not clear the extent to which financial risk assessments will replace existing obligations. A key challenge for the GC moving on from the pilot is that it has committed that mandated financial risk assessments will be entirely frictionless; and will only be introduced if the pilot proves they can be done in a frictionless manner, based on data-sharing.”

How important will these affordability checks be in ensuring operators protect customers?

A key part of these new rules from the Gambling Commission is related to increasing the safety of customers, and Williams has underlined what these checks are set to bring in: “Financial vulnerability checks will ensure that even at a low level of losses (£150 per month from Feb 2025), customers will be flagged for issues such as bankruptcy, CCJs or other financial risk markers. These are only public records but are the sort of checks you’d expect somebody offering you finance to undertake. 

“They are obviously not conclusive, because a person without these risks can still lose a significant amount of money gambling. Financial risk assessments with data sharing, including items such as mortgage or loan arrears (prior to any formal action having been taken) will be much more thorough.” Blow highlighted the importance of the affordability checks for protecting customers: “Prior to the new vulnerability checks, operators were already subject to significant requirements to identify and take action to reduce the risk of harm to vulnerable customers. These new checks should help ensure greater consistency across the industry in respect of a key threshold for protecting customers.”

Do you think players being driven to the black market is a realistic threat as a result of these checks?

There have been some fears that introducing these measures will lead to players being driven to the black market, but this has been disputed by Williams: “There is a good argument that tightening of AML and social responsibility measures has already led to a lot of customers migrating to the black market. Many large spending gamblers (including those with a gambling problem) will already be gambling with black-market operators, many using crypto and connecting via a VPN.

I therefore don’t think these measures will have much impact, as the migration has already taken place.” Blow also doesn’t believe there will be too much of a threat: “The new financial vulnerability checks are an overlay to existing social responsibility requirements, and for the majority of operators we don’t expect it will result in a significant lowering of initial thresholds driving customers to the black market. It may impact small operators (and therefore customers) at the fringes – where they have a licence but were still using high thresholds that the GC could have found to be uncompliant under the old rules.”

Can you see the UK payments industry in gambling changing dramatically as a result of the affordability checks?

Looking ahead on if the industry may change much as a result, Williams  said: “No not really, although there will obviously be more opportunity to ‘turn off’ customer spending whenever financial vulnerability is flagged and  the operator feels it is necessary to take the proportionate step of closing the customer’s account.”

Blow concluded: “Given the focused nature of the new condition on financial vulnerability checks, I would not expect  it to have a dramatic impact on the payments industry. The outcome of  the pilot may have a bigger impact, but that depends on its scope.”Prior to print of this magazine, Gambling Insider was invited to attend the CMS Gambling Conference 2024 (as seen in the images below), led by CMS partner and Head of Gambling David Zeffman. The conference was attended  by a variety of UK gambling executives, who heard from a panel featuring insight from Gambling Commission CEO Andrew Rhodes, Betfred CEO Joanne Whittaker, Evoke (formerly 888) CEO Per Widerström and ex-Sky Bet CEO Richard Flint.

Within the one hour and thirty-minute session, attendees heard from Rhodes in a one-on-one about his time in the Commission, as he reflected on the many changes within the industry in his short time at the regulator. Rhodes was then joined by Whittaker, Widerström and Flint on stage to answer questions on the big issues currently present in the UK sector.

Given the conference was right in the middle of a General Election campaign, the timing seemed almost perfect; but the main talking points surrounded the UK regulatory framework, affordability checks, growth opportunities within gambling and much more. Overall, the event underlined the growing positive relationship between the Commission and the industry but emphasised that going forward collaboration and communication will be key.