The SCOR dilemma

David Wylie, Director of LendingMetrics, argues that the existing SCOR restrictions are preventing gambling operators from complying with affordability obligations – but there is an alternative.

Gambling is now a large and obvious target on the Government’s regulatory radar. High-profile problem gambling cases have exposed a culture of lax, some might say lazy, consumer safeguarding checks that have led to individuals racking up massive debts.

The drip feed of cases covered in the national Press prompted Tom Watson, Labour’s deputy leader, to call problem gambling a ‘public health emergency’ and demand far tougher government oversight. The regulations that currently apply are no doubt going to get even tougher as time passes – even if Labour does not get in at the next election. Current regs around affordability look them up.

And retrospective mis-selling actions – such as PPI that has hobbled the banking sector – cannot be discounted for gambling operators that have failed to make adequate affordability and creditworthiness checks.

The big issue for those trying to ensure they are compliant is that they are currently restricted in making thorough checks because of the Steering Committee on Reciprocity (SCOR) data sharing framework. At present, credit data access is not allowed to those who are not part of the SCOR closed-user groups who contribute, as well as tap into, creditworthiness data.

Gambling companies are outside this arrangement and do not have access, so have always had to make do with historic credit checks such as AML and other manual processes. In an analogue era, this and paper documentation was workable, but in an age of online gambling, when tens of thousands of pounds of gambling debt can be accumulated in a matter of minutes, this arrangement has exposed a giant area of vulnerability. Individual’s creditworthiness can change dramatically from one minute to the next, without a gambling provider being aware of it.

Many ask how it is fair or reasonable to expect gambling providers to conduct checks to the same standard as credit providers, when they do not have the same access to data because of SCOR. Up until recently, it has been impossible to address this issue.

However, there is a way around this. An overlooked feature of the Open Banking revolution is that it can be used to give those who are not part of the SCOR framework access to real-time current account statement data.

Open Banking effectively forces banks to share their line-by-line detailed customer statement data with third parties, known in the industry as Account Information Service Providers (AISP) who are appointed and regulated by the Financial Conduct Authority. And businesses can access this 100% accurate data via AISPs such as LendingMetrics.

So, with a borrower’s permission, and using an AISP, you can gain access to months of client transactions in milliseconds. Read-only data comes directly from the bank that holds a current account to the AISP and to you, so the chances of fraud are drastically cut.

Someone applies to gamble, agrees to limited timeframe and read-only access to their accounts, and thousands of lines of transactions can be analysed by computer. Problem gambling and other gambling accounts will be noted. In an instant, this can pull out salary details and all financial commitments, to be then tested by algorithm to determine whether you should be allowing this individual to gamble. It is all done automatically and works seamlessly alongside automated AML.

For the first time you can make an affordability assessment that is extremely accurate. Gambling that really should not be okayed because of credit, affordability or potential fraud issues, is far less likely to be allowed.

The technology can pick up on things that would otherwise be overlooked: spending patterns that if continued would lead to budgeting problems, such as spending that indicates gambling with multiple companies. And it picks up simultaneous or near-simultaneous gambling. All this is done digitally and, as mentioned, in milliseconds. No more laborious supplying of paper ‘proofs’, no manual assessment. It is all automated.

I would like to say that all gambling companies are embracing this feature of Open Banking and that their clients now benefit from products offered by AISPs such as ADP and OpenBankVision. But we are not quite there yet: old habits die hard. Although the costs are minimal, many are still wedded to outdated procedures.

However, the force of regulatory legislation is not going to let up, nor, more importantly, are the financial penalties for failure to safeguard the consumer. Gambling operators may soon find that the costs of not embracing such technology are far greater than they bargained for.