Published
OnlineLegal & RegulatoryIndustryAffiliate

Ask the Expert: How is the ever-tightening regulatory landscape impacting affiliates?

Philip Bell, Head of Partnerships at QiH Group, discusses the impact of regulation and compliance on affiliates.

phillip bell new

While there are likely to be few people brave enough to put forward a firm prediction about when the UK Government’s gambling White Paper will be published, most are expecting recommendations for tighter regulation when it does finally arrive.

Given the heavy compliance burden already placed on UK operators, this has led some operators, particularly tier 2 names, to abandon the market in favour of other jurisdictions.

On the other hand, other operators have been preparing by pre-empting possible changes, for example, by tightening up their affordability checks. Here, Bell discusses how the increased focus on regulation and compliance is impacting affiliates.

Several operators have been moving away from some or all unregulated markets in recent years. Do you see them demanding their affiliates do the same?

Some of the biggest players, such as the listed companies, want to avoid markets where they don’t have a licence. The biggest operators might want to sit and wait for places to regulate because they might not make enough money in grey markets to compensate for the risk of operating there.

As to whether they apply that standard to the affiliates they work with, it is likely to be a consideration as it might not be a good look if one of the PLCs is working with an affiliate that gets into trouble in a grey or black market, even if it’s not related to their account. What we’ve seen recently is that the bigger operators, in particular, want to work with a smaller number of affiliates they can trust as their source of compliant traffic.

As an affiliate, we have always focused on working in regulated markets as we are very concerned with compliance. As such, we only operate in the UK and the US.

Why did you make that decision as a business?

The nature of affiliation is that you have complaint affiliates and non-compliant affiliates. Those affiliates that want to create big businesses and might eventually aspire to become listed or put themselves up for sale, will struggle to do that if their revenues don’t come from white markets.

It would be easy for a company like ours to go into Finland and other grey markets, but that is not the approach we want to take. The regulated market is where we see value in the business. We don’t want to be operating in a market where the rug can be pulled out from beneath you, which we’ve seen happen in Holland, for example.

Even without that level of risk, changes to regulation in your markets must still have an impact at the affiliate level, surely?

The nature of affiliation is that you have complaint affiliates and non-compliant affiliates. Those affiliates that want to create big businesses and might eventually aspire to become listed or put themselves up for sale, will struggle to do that if their revenues don’t come from white markets

The group always felt there would be compliance changes in the UK, and that has proven the case with the changing rules of operators on customer affordability. However, the business model of the group has always been aimed at getting scalable and sustainable players – those playing for a hobby – rather than those who use strategies and create volatility. That said, the rules around affordability as they stand are a bit vague, and it’s sometimes a case of operators being penalised after the event without knowingly having done anything wrong.

When it comes to affordability, the first preference of the industry might be not to have affordability checks, but if they are a requirement, it would help if there were clearly defined rules and processes. If the rule was that a player could only wager say a certain percentage of their annual income, at least everybody would know there were hard and fast rules everyone had to stick to.

Changes to advertising rules, such as the recent changes restricting gambling firms from undertaking any advertising of ‘strong appeal’ to under-18s rather than the previous ‘particular appeal’ test, obviously present the same compliance challenges for affiliates that they do for operators.

Do you think it’s these kinds of changes driving some operators out of the UK market?

As an affiliate, we see what all of the operators in the market are doing and we can see some of them are scaling back in the UK due to the increased compliance burden, whereas others are doing the opposite and doubling down in the market.

Another important point is that while compliance and regulation do create challenges for both operators and affiliates, they can also lead to opportunities

Some of the companies that are pulling out are those that either don't understand the market or haven’t invested in local expertise. If you are making easy money with an MGA licence and then trying to replicate that model in the UK, it is just not going to work. Any company that doesn’t have a core UK business or UK focus is likely to struggle in the market, in my opinion.

On the flip side, the operators that are doing well are those that have the majority of their business in the UK and those that are very data-led and very focused on the business’s bottom line. They are not just going out and spending gung ho, but rather they have the right systems, tools and products in place.

The ones that work closely with their affiliates tend to do better as well. When I say work closely with affiliates, I mean being open to sharing data and sharing player values, because when both the operator and the affiliate have visibility over the same data, it’s easier to make sure the approach is properly targeted and that budgets are allocated accordingly.

Another important point is that while compliance and regulation do create challenges for both operators and affiliates, they can also lead to opportunities. For example, in the US, affiliates need to apply for vendor licences, which is unusual in comparison to Europe.

Having recently been through such a process in several states, we know that providing our services involves jumping through several hoops. However, it also increases the barriers to entry, therefore decreasing the competition in the affiliate market. The same is true in the UK – as regulations tighten, those that are willing and able to meet the increased compliance demands will gain a competitive advantage over those that aren’t.

Premium+ Connections
Premium
 
Premium
 
Premium
 
Premium
 
Premium
 
Premium
 
Premium
 
Premium
 
Premium
 
Premium
 
Premium
 
Premium
 
Premium
 
Premium
 
 
Premium Connections
Consultancy
Executive Profiles
Chicken Ranch Casino
The Responsible Gambling Affiliate Association (RGAA)
Catena Media
Gambling Commission
Follow Us
The most prestigious Awards in the industry are heading to the Philippines! The Global Gaming Awards Asia-Pacific will recognise and reward (as the name suggests) the strongest performers from the Asia-Pacific gaming industry across the previous 12 months.
This year's winners will be announced at a luncheon ceremony on Day 2 of SiGMA Asia, 4th June, in Manila.
The eleventh annual Global Gaming Awards Americas will recognize and reward the gaming industry's strongest performers across the previous 12 months. These are the most prestigious and trusted Awards in the industry and have gained respect amongst industry heavyweights, due to the strict rules and procedures put in place.

Facing Facts: Operator Q3s from across the globe

Gambling Insider compares Q3 2023 results from major gamblin...

Taking Stock: Operators and suppliers across the world

Sticking with our theme of gambling across the globe, Gambli...

CEO Special: Jade Entertainment and Gaming CEO Joe Pisano - down to earth

Jade Entertainment and Gaming CEO Joe Pisano speaks to Gambl...

CEO Special: Betfred CEO Joanne Whittaker - saying it as it is

Betfred CEO Joanne Whittaker joins Gambling Insider Editor T...