Very important problem: Assessing the future of VIPs in online gaming

In 2017, EGR ran an opinion piece about the industry’s ongoing hunt for high rollers. “Egaming is desperate to tap into the VIP market that casinos have dominated, where players often play for $4m a hand,” the piece read.

It’s hard to imagine, less than three years on, just how much has changed. William Hill said last year it had closed 30% of its VIP accounts in the prior 12 months as it sought to bring itself in line with increasingly stringent regulations around source of funds and affordability checks. The company’s online MD Phil Walker was speaking at a parliamentary committee meeting on responsible gambling, where Flutter also said it was shutting thousands of accounts each month.

The closures appear to have had at least some impact on UK online gambling revenues, but the anti-high-roller trend shows no signs of slowing down. The UK Gambling Commission (UKGC) has singled out VIP gambling as part of wider concerns about affordability checks being conducted by operators in its 2018-19 enforcement report, calling for greater action in this area.

In an interview with EGR, UKGC CEO Neil McArthur claimed there were “additional risks” on VIP and high rollers, particularly in respect of anti-money laundering, that required increased scrutiny from operators.

Under the spotlight

A flurry of headlines from mainstream media outlets in Q3 2019 further thrust high-value players into the spotlight, with operators accused of inducing problem gamblers to bet through a variety of perks, such as sporting tickets and racing hospitality. A job posting for a VIP account manager was also publicly picked over in the press.

In a story on the job posting, the Guardian quoted Charles Ritchie of the charity Gambling with Lives, who said: “This advert is particularly chilling – the end of a player’s ‘lifetime value’ to the
company may well be the end of the player’s lifetime. The predatory practices of these gambling companies are designed to maintain and increase addiction. Suicide is highly correlated with gambling addiction.”

It speaks to the current standing of the industry in the mainstream press that a fairly mundane job posting could elicit this type of reaction. As a result, the Betting and Gaming Council (BGC) has made VIPs one of its first priorities since its formation, with the trade group saying last November that, in H1 2020, it planned to introduce a code of practice around the handling of VIP players and operator inducements to gamble.

Full details of the code have not been disclosed, however EGR understands one of the measures will see the requirement for comprehensive source-of-wealth checks before customers can place certain types of bets. The BGC also added that it will introduce a ban on any hospitality being given to players deemed to be at risk of gambling-related harm, together with new rules preventing operators from giving staff members cash bonuses for attracting and retaining VIP players.

Into the black

The assault on VIPs, however, has come with some drawbacks that are arguably endangering players rather than protecting them. For the thousands of accounts that major operators have closed, a simple question has to be answered. Where are these players going? Have they simply given up the thrill and escapism of high-stakes gambling? Or have they turned to less-scrupulous operators?

“It’s really naive to think these people have stopped gambling,” says Sam Brown, CCO of Hero Gaming. “Of course, they’ll just be moving through your competitors, and if they can’t do that, they’ll move to the black market. They definitely won’t be stopping in my opinion.”

A recent study backed by William Hill and GVC flagged concerns the UK black market might be expanding, while Swedish channelisation rates could be as low as 65% across sports and casino. “People are feeling the pinch in this area in Sweden,” Brown says. “While the regulator is doing absolutely nothing about the black market, the risk is extremely high for players to find themselves in the wrong place. That’s the key, you want to have a regulated space where the VIPs can play.”

“We don’t have access to the same types of systems and tools the banks do to ascertain source of wealth. There’s no universal rule you can follow to say, ‘Here’s a fully bona fide source of wealth’”

Spanish regulation, for instance, does not allow customers to deposit more than €2,000 a month, meaning there are essentially no VIPs in the online market. “Imposing absolute financial limits is just the wrong way to go,” Brown notes.

Check please

So, is there a way to keep these VIP customers in the regulated market where they can be properly protected, while complying with stringent regulations in places like the UK and Sweden?

The key, of course, is establishing exactly how much a customer can afford to lose. In Sweden, tax records are completely public, and operators can use these to calculate income and then apply mandatory deposit limits on customers. Brown says the limits are based around the idea that a customer in Sweden tends to lose around 20%-25% of deposits. This compares to around 40% in the
UK, with the difference largely thanks to the ease of moving money in and out of accounts in Sweden using the BankID system.

However, applying these deposit limits based on wages alone is a deeply flawed process. As Brown notes: “Most VIPs tend to be older and people that have made significant money from sources like property or investments, and are not currently working and pay taxes.”

He says there is currently a significant lack of sophistication in understanding source of wealth, which is forcing operators to turn away high-value players, sometimes in error.

“It’s tricky because we’re not banks, and we don’t have access to the same types of systems and tools the banks do to ascertain source of wealth,” Brown says. “There’s no universal rule you can follow to say, ‘Here’s a fully bona fide source of wealth’. We, as an industry, need to improve the tools we use.”

As Brown says, there’s no silver-bullet solution currently in the market, but it’s worth noting other parts of the payments sector have benefited from financial deregulation, with companies like Trustly offering technical solutions to streamline payments. There’s arguably a space here for third parties to fill this void and provide an effective source-of-wealth tool, with an industry-agreed level of variable loss and deposit limits.

There’s also an argument to be made for operators to start making these changes, where possible, ahead of expected regulation. Brown says Hero Gaming has an “insane level” of retention in Sweden because it has established these deposit limits and built a level of trust with its players.

“Although you might upset some players in the short term, they will understand in the long run and feel safe playing with you,” Brown says. “What do you want the business to be about? I think the vast majority of us in the industry want to take good, clean money from proper players with correct controls and allow them to enjoy the entertainment in the way that it’s supposed to be consumed.”

Bespoke solution

In many ways, VIP gambling is almost an entirely separate part of the business. It still has an important place, but it is a long way removed from the mass-market casino model that many of the larger casino firms, like 888 or LeoVegas, have now adopted. Is there a case then for operators to launch a dedicated VIP brand alongside the mass-market brand and fine-tune the different experiences?

That was the theory over at Kindred, which launched its Storspiller brand in 2017 under the tag line, ‘For people who play big’. Out of Kindred Group’s customer base in the Nordic region, the company said there was a small group of high rollers who play for £200 or more a month, which it was targeting with Storspiller.

“Instead of pretending as if this group of players does not exist, we have chosen to take their needs seriously, and are launching a safer gambling environment and a better reward system,” Peter Alling, Kindred’s head of Nordic public affairs, said at the time.

New customers are subject to third-party affordability assessments, along with mandatory ID checks, BankID registration, the PS-EDS surveillance system, self-exclusion tools and a range of other responsible gambling tools.

The brand is still live today in Sweden, suggesting it is at least washing its face, but other recent high-roller launches are hard to find beyond Fortune Legends, the VIP brand launched by Malta-based start-up Mobilt back in May 2019.

That brand offers up to 0.5% of cashback on every spin, but this type of thing is currently the exception rather than the rule. Could we see more VIP-focused brands, as ‘standard’ casino
products are increasingly aimed at recreational customers?

Taken to the limit

Brown is not necessarily convinced. “Lots of people have tried and failed miserably to set up a VIP brand.” Instead, he calls for better customer segmentation on existing products, meaning different customers are shown different limits on slot games based on their respective wealth and income, for example. “This is something we’re looking at currently, but we are a little reliant on suppliers here,” Brown says.

Like affordability checks, there’s surely an opportunity here for a supplier to cater to this type of demand for wealth segmentation. The solutions to the VIP problem are all in sight and just need a little technological enhancement to make them more accessible. It’s an important gap to bridge, because the industry does have a legitimate argument here that it needs to be allowed to cater to high-value players. Let’s just hope they can convince regulators and the mainstream media of that.