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Management Series: corporate-governance

Protecting the punters

Online betting companies must do more to identify and help problem gamblers or face oppressive regulation, Cass research suggests. Sean Farrell reports.

The online gambling industry faces a choice: take the lead on protecting vulnerable customers from themselves, or take a big gamble with its own future. On offer via the internet are lotteries, poker, casino games, sports betting, bingo and, increasingly, in-play betting in which gamblers bet on details of sporting events as they take place. Online still has a small share of the UK gambling market, increasing from 6% in 2007 to 7% in 2010. In 2009-10 the total wagered online, excluding betting exchanges, was almost £12 billion, up from about £10 billion the year before, according to the Gambling Commission. In 2010 there were 366 licensed remote operators in the UK. However, players may also access non-regulated operators too. It is difficult to estimate how many of these there are. Most online operations, including those of the high-street bookmakers Ladbrokes and William Hill, are in offshore centres such as Gibraltar or the Isle of Man for tax reasons but the Government has plans to require all online gambling companies operating in the UK to hold a domestic licence.

Spotting problems
Cass alumnus Simo Dragicevic is the Founder and Chief Executive of Bet Buddy (bet-buddy.com), which helps operators spot potential problems among their clientele. Dragicevic and Dr George Tsogas, Senior Lecturer in Management at Cass, have co-authored a report, Can the Online Gambling Industry Continue to Grow Profits whilst Protecting Players? They argue that if companies prevaricate over investing in protecting customers they risk paying a higher price in the future in the form of reputational damage and oppressive reactive regulation. Tsogas says: "It is always cheaper to get the ethics right at the beginning, rather than to have to repair a damaged reputation later. Nothing could be more costly for an online gambling company than to be exposed in the media if, say, a teenager evaded identity checks and racked up a huge debt on a family credit card, or worse." Dragicevic interviewed several senior figures in the industry, including Roger Steare, Visiting Professor of Organisational Ethics at Cass; Alex Blaszczynski, Professor of Psychology at the University of Sydney and author of Overcoming Compulsive Gambling; Andy McLellan, Chief Executive of the industry-funded charity GamCare and a former Head of Gambling at the Department for Culture, Media and Sport; Christel Schaldemose, a member of the European Parliament's Committee on the Internal Market and Consumer Protection; Clive Hawkswood, Chief Executive of the Remote Gambling Association and a Director of the Responsibility in Gambling Trust; Jean Moreau Jorgensen, Executive Director of the World Lotteries Association; and John Carr, Secretary of the UK Children's Charities' Coalition on Internet Safety.

Vulnerable customers
The findings suggest that the sector will have to take the lead in protecting its vulnerable customers and its reputation. In 2010 the helpline at GamCare took 50,788 calls. According to the UK Gambling Commission's two most recent prevalence surveys, there are 250,000 to 285,000 problem gamblers in Great Britain. The commission's 2010 survey showed a 50% rise in problem gambling from 0.6% to 0.9% of the UK population in 2007. Although the rise is at the margins of statistical significance, the emotional and financial impact on sufferers and those close to them can be profound. Callers to GamCare report high levels of anxiety, stress and relationship problems and 39% of callers said they were experiencing financial difficulties. Gambling online in the UK is illegal for anyone under the age of 18. For lotteries and football pools the legal age is 16. Companies verify a customer's age with software that checks the electoral roll, credit agencies and other data. Players can also limit their gambling through self-exclusion. John Carr said: "The online gambling industry is now viewed as a model (on age verification) for other relevant industries with online channels."

Blocking software
However, these measures were forced on the industry by the 2005 Gambling Act, which also set up the Gambling Commission. Before that, a study of UK online operators found 97% had no self-exclusion service, 77% had no reference to controlled gambling and 37% had no age verification at registration. Dragicevic says that the technology at companies' disposal - especially the ability to share information on self-excluded players - has surpassed the obligations imposed by the 2005 Act. However, there is no legal or regulatory requirement for industry-wide self-exclusion that would prevent problem gamblers from skipping from site to site. He adds: "PC blocking software is available to prevent vulnerable gamblers accessing internet sites. However, not only are there different PC standards but also betting is increasingly taking place via texting, smartphones, tablets and interactive TV and the software is swiftly becoming ineffective." In America, online gambling is illegal. In the European Union, attempts to co-ordinate monitoring and standards have failed to overcome national self-interest. Tim Phillips, who until May this year was Director of European Public Affairs at Betfair, the world's largest internet betting exchange, said that with little co-operation between nations it was in the sector's interests to go "on the front foot" to drive improvements.

Staying in control
Dragicevic says that regulators have less information than the industry and "the industry needs to keep innovating (on player protection) because in doing so it stays in control of the agenda and avoids onerous regulation. The online industry has always made this point - that it is ahead of the curve - but it hasn't done anything really innovative since the 2005 Act. "While there are examples of innovation in player protection, such as some lotteries using behavioural analytics technologies to identify problem gamblers, these remain the exception rather than the rule". Christel Schaldemose said: "The majority of the established and serious online gambling operators are aware of what they need to do from a (corporate social responsibility) perspective." The second part of the research by Dragicevic and Tsogas builds on pioneering work at Harvard Medical School on problem and internet gambling. Bet Buddy, in partnership with GTECH, a gambling software seller and lottery manager, analysed online gambling data to detect risky gambling patterns among casino and poker players. Jean Moreau Jorgensen said: "Offering value-added services, such as informing players of spend and any changes to their playing patterns, could… enhance an operator's brand." Tsogas says these should be regarded as immediate and essential goals. He concludes: "Too many companies have learned the hard way that ethics and social responsibilities, when violated, can tarnish their image and reputation irrevocably. Active engagement and prevention, rather than reliance on market forces, offer the best prospects for achieving both profits and sustainability."

Sean Farrell is a freelance journalist and Acting Financial Correspondent at The Independent.

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