Pulse

Can Open Banking make gambling safer?

By Lewis - 23 July 2020

Max Emilson, CRO of TrueLayer, discusses how Open Banking enables online gambling operators to create better safe guards and enhanced user experiences.

Online gambling can often stir mixed emotions in people. On one hand, it’s a pleasurable pastime safely enjoyed by millions of people. On the other hand, there are concerns regarding how it can facilitate problematic gambling behaviour. These fears, although impacting a very small minority of players, are of course justified. There is always room to improve. This is where Open Banking can make a big difference in creating a safer and better user experience.

For the uninitiated, Open Banking is the global movement to increase competition, lower prices and improve services in the financial industry. Most legislation revolves around liberalising the financial data held by banks to enable other companies – usually fintechs – to provide a raft of new services to consumers. In the UK Open Banking is regulated by the CMA and complemented by EU legislation called PSD2.

So how does Open Banking enhance online gambling? First, operators can connect their app or website directly to a player’s bank account using Open Banking, which means they can access account ownership data to use in the KYC process and analyse transaction history to weed out fraudsters. This is particularly useful in markets across Europe where regulation and age restrictions are different in each region.

Analysing transaction history is also a critical component for identifying potentially problematic gambling behaviour. Operators can create a host of safeguards that can stop players before they incur serious financial harm. This can go beyond simply recognising someone playing too much or spending too much. It can take into account factors such as how much they are betting as a proportion of their income, how much money they will have left till their next pay day, if they are gambling on multiple sites and so forth. This can allow providers to create tailored interventions that stop players slipping through the safety net, while also preventing responsible gamblers being ensnared by blanket provisions.

As well as giving operators more transparency and insight into the behaviour of players, connecting directly to a player’s account also enables direct payments. There is no need for operators to rely on third party providers for KYC, AML, or payments processing. This eliminates friction for the players and significantly reduces complexity, operational risk and cost for operators.

When making an online payment, players no longer need to be redirected to an e-payment interface, such as a credit card payment gateway. Instead, thanks to Payment Initiation services (which is enabled by PSD2), when the player wants to fund their account, operators can execute direct payments as a trusted holder of login and transfer credentials that have been pre-authorised by the player.

When a player wants to withdraw winnings, the operators can instantly payout to any account using the same method that was used to fund the account. Not only does this give players a seamless experience it can also aid in the fight against problematic behaviour by reducing the temptation for players to continually gamble their winnings.

This is just a snapshot of how Open Banking could impact the online gambling industry. The reality is that it will provide a host of new tools for operators that can be leveraged in scores of different ways. My view is that making everything safer and easier for players will provide the greatest long term benefit.