Nobody wants to see people suffering from gambling related harm. The regulated gambling industry is required to use lots of data to detect people at risk. Financial Risk Assessment (FRA) pilot asks gambling companies to go further.
FRAs are designed to be as frictionless as possible. Using Credit Reference Agencies (CRA) to determine how at-risk a person is financially allows gambling operators to adjust their treatment of customers.
Here’s some data risks I can see with FRAs:
1. Dependency on CRA data
There is an assumption that CRAs always have accurate and up to date data on the population. Anyone who has worked with CRAs knows this is not always the case and I’m sure there will be contractual wording that protects CRAs from data inaccuracies in their final product. What is clear from the FRA pilot output so far is that different CRAs have different data points on which to make decisions which breeds inconsistencies. It will be interesting to see what accuracy requirements come out of this pilot and whether there will need to be alignment on CRA data points – which creates issues with commercially competitive CRAs.
2. Bias
Who has a record with CRAs? Not everyone. It is still common for there to be gender bias in CRA data as men are more likely to have credit files than women. This can make decisions based on CRA data bias in some cases and there will need to be manual processes to remediate these issues.
3. Absence of data
Similarly to bias, not everyone has a credit file and Current Account Turnover (CATO) data – i.e. the view of money that moves in and out of a person’s bank account – may not be representative of household income and discretionary spend. The GC has acknowledged in its trials the impact ‘thin-files’ could have on the frictionless decision-making process. If there is an absence of data, operators will need to revert to requesting documents.
4. Complaints leading to DSARs and claims
The output of the FRA pilot appears to be overwhelmingly positive with a small percentage of issues. However, a small percentage at this stage can still create tens of thousands of complaints across the industry. Complaints relating to financial vulnerability are complex and can take a large amount of resource for even the biggest operators to handle. Whilst one operator is unlikely to receive all of these complaints, even a few hundred or low-thousand can create operational impact and operators will need to be clear about how decisions have been made. I note that operators already deal with complaints regarding financial vulnerability and a successful FRA pilot would likely reduce the overall number of complaints if implemented effectively.
We know that DSARs are used as a last resort complaint escalation. Gambling companies will need to provide information on how they came to decisions which could mean disclosing the financial risk data they receive from CRAs.
5. Transparency
Gambling companies can see a detailed record of your financials – is not a great message to land to customers. Admittedly we do not know what the final CRA product might look-like but gambling companies suffer from a lack of inherent trust by virtue of the industry they operate in. Getting transparency right so that people understand what happens with their data and the ‘why’ behind it will be tough and requires CRAs and gambling companies to work collaboratively.
The GC doesn’t like betting companies saying to customers that ‘the regulator has told them to do it’ but in this case it is hard to see how operators can justify FRAs without saying that it is necessary to comply with their licence requirements, which is issued by the GC.
Finally, there is usually a data exchange that happens with CRAs. CRAs will know that a person has hit a threshold for a FRA check. It remains to be seen whether CRAs will use this knowledge in their financial risk modelling for customers. This means that a person’s gambling activity could adversely affect their ability to apply for credit in future – depending on how the CRA product works.
I don’t think that any of these risks are showstoppers. These issues can be worked out in the creation of a suitable FRA programme. But, I think that this will not be a completely frictionless experience for some and so requesting financial documents like bank statements is here to stay for a portion of gambling customers.
Update of Stage 2 of the FRA pilot: https://www.gamblingcommission.gov.uk/blog/post/financial-risk-assessments-pilot-update-on-stage-two
