The potential of open banking in online gambling

You can draw quite a few parallels between banking and online gambling. Both are heavily regulated industries, dealing with customer information and vast amounts of money. Both rely on complex technologies, whether it’s legacy systems or more recent solutions. They also manage risk and tackle financial fraud, so the need for robust preventative systems is very high.

However, when it comes to innovation and introducing new technology, the financial industry has been quite slow on the uptake until very recently. On the other hand, online gambling activity has risen in the past 15 years thanks to the launch of mobile phones. In the meantime, we’ve seen many financial disruptors like Monzo and Transferwise, among others, enter the payments market with quite specific digital-only services to take on banks and help customers manage their finances in a more flexible way. However, financial institutions are now playing catch up and investing more into tech to optimise their user experience and online services to keep up with the smaller players.

Today, consumers can have multiple bank accounts for a number of services – savings, mortgage, loans etc, and they can be with different banks. So far, this has been quite difficult to manage and get a good overview of them all together. But open banking is one of the latest trends to address this by displaying financial information from different accounts on one screen.

Open banking is a new service that allows authorised financial providers to share data with each other to display it in one account regardless of the bank as long as the customer gives their permission. For example, if you have a current account with Barclays, by linking accounts from other providers, you can see your credit, mortgage and even utilities information in the same app. Moreover, authorised third-parties like insurance companies can also be part of this. This is to offer a more transparent view of finances, help get more tailored products and manage money in a more effective way.

So, how does this fit in with online gambling?

Addressing problem behaviour

While it’s still early days for open banking, there could be many uses for it outside of finance. As it involves sharing financial information with not only other banks but regulated third-parties, online gambling could greatly benefit from open banking in many ways.

Currently, the online gambling industry is heavily focused on tackling problem behaviour and fraud, as well as working on improving its reputation around helping vulnerable customers more. The new customer verification regulation that took place earlier in May is one of the latest changes. However, the requirement for customers to confirm their identity and address before depositing or betting isn’t the most intuitive onboarding experience. Customers need to upload copies of their documents (e.g. passport, utility bill or bank statement) to verify, however, they may not always have them at the time and they need to obtain them from another party. This can increase drop offs and lower acquisition, as well as retention rates, so operators already have a great challenge on them.

Open banking could really help if operators were to integrate it with the verification process. At the point where customers are required to upload documents, they could access them directly from providers without having to leave the page. This not only would speed up the process, but make it more transparent and secure to share documents this way. As some customers may want to register with a few operators, verifying with the help of open banking wouldn’t put them off as much as having to find physical copies of their documents.

There’s another potential for open banking to help operators provide useful tools to anyone struggling with their finances. By tracking spend or patterns in behaviour which leads to increased spend could help prevent it. Opening up customer data to other regulated schemes could really help address this. For example, organisations like GAMSTOP or GamCare that have access to a customer’s gambling information could offer tools to encourage them to self-exclude or set limits on how much they could spend at a time. Several banks are already offering to block gambling transactions, so this could be another step to working together to provide support to customers.

Building software that monitors spend across different bank accounts and the proportion of transactions relating to gambling activities could be very useful to those trying to reduce it. It would offer vulnerable customers more control over their finances and improve responsible gambling.

Tackling fraud

Financial security and money management are equally important for online gambling operators, and open banking could be a useful asset to strengthening them. The data shared between bank accounts could be used to help ascertain anti-money laundering risks and assist with enhanced due diligence in online gambling. Sharing information about proof of funds could help operators monitor suspicious transactions and reduce fraudulent activity while banks could also monitor certain accounts that have high gambling transactions. The UK Gambling Commission is looking for technical tools to help manage risks for both responsible gambling and anti-money laundering, and have already championed open banking as a potential solution. As the entire gambling industry is currently working towards increasing security measures and protecting its customers, this could be a welcome solution.

There’s a good chance that open banking will become something we’ll see more of across a number of industries in the future once more financial providers and suppliers get on board with it. You can build software to securely integrate gambling providers with open banking to help them offer more tools for providing support and protection to customers. It will be interesting to see how others will adopt it and how it will affect innovation across different industries. Open banking could be something that could transform the financial industry and act as a bridge to products and services from other sectors.

Daniel Brookes is a compliance director at Degree 53 with expert knowledge of the global regulatory environment. He works closely with operational and software development teams to build successful compliance and payment departments.