UKGC and ASA regulations are decimating gaming stocks

There are not many industries which manage to generate over 70% increase rate in just about ten years. Well, the gambling industry certainly wanted to test and prove its own theory and managed to pull it off.

The online casinos UK space has shown some remarkable and impressive growth rates, easily adopting new trends and technologies. However, as it continues to grow, it will drive change in the regulatory landscape and new rules and compliance regulation shall be introduced, changed, and that is something that could impede gaming stocks or affect customer rates

The UK Gambling Commission (UKGC) in this regard, has shown some remarkable confidence that it is time for the iGaming sector to modernize some regulations dating back to several decades ago and give them a critical update needed to match the existing technology and to make the industry more secure and fairer for all users.

Latest developments

The UKGC encouraged and participated in an open discussion with the industry at the end of last year and subsequently announced the set of new rules only couple of months ago. These newly designed regulations were developed following this public consultation and became official starting May 7.

The old rule was all about giving the operators at least 72 hours to wrap up the age verification process. At the same time, it provided gamblers the ability to place bets and/or make deposits during the said time frame.

Basically, what the new set of rules require is for the identity and customer age to be verified before funds may be deposited into an account or gamble including free to play bets in online betting or gambling.

On the surface, it seems that the changes make sense, especially since many anti-gambling campaigners have alluded to the fact that a stricter ID verification process should help problem gamblers.

A deeper look on the implications for licensed operators

As with any new regulation, there is a lot of potential for operators to expect and hope to gain benefits such as improved customer experience and better framework for pushing the industry further, however, the initial and still ongoing friction, the already increased operational costs, and the possibility of customer drop off are not something they would easily turn a blind eye to. Why?

Well, preventing legitimate users from playing until the appropriate age and identity checks have taken place will create a barrier. There’s generally no reason to see this as a rising issue when eventually players realize why these checks are done in the first place, but it is still a barrier. And barriers affect numbers.

Furthermore, the newly established checks complicate the identification process even for valid consumers who cannot claim their earnings due to technical issues with the identification system. Finally, not everyone wants to share personal information or go through round after round of identity verification checks. Well, this affects consumer drop-off.

The result

As soon as these new rules turn a rather simple and straight-forward process into a labyrinth – people will start having second thoughts on them.

Barriers and consumer drop-off cause share prices of big players to decline considerably. The biggest operators get the hardest blow and not only they will end up paying a rather substantial amount of money, they will be gradually losing their value through stock decimation as a result of this action by the UKGC.

Just as a reference, nearly £14m in penalty packages will be paid by only a handful or companies due to their failings to put in place effective safeguarding measures to avert money laundering and keep consumers away from gambling-related problems.

On another note, important and popular market players such as casino guides website Catena Media, NetEnd and LeoVegas found themselves wrapped in the middle of all of it and got up in trouble again leading to over 60% and 40% loss of stock value respectively in the past year alone.

What can operators do?

With the deadline already on our doorstep and the possibility of fines for non-compliance, the first thing operators should do is thoroughly review the full guidance the UKGC promised to deliver before the deadline to make sure they meet the requirements.

In this regard, operators should focus their attention on finding and introducing various tools that help verify age and identity in more places along the regular customer journey. There is a plethora of tools that can check fraud while curtailing friction during the sign-up process.

In any case, a more detailed and thorough check will help in determining how risky the customer is based on the information provided. Once operators get their hands onto this information, they can set thresholds for accepting or rejecting potential customers and comply with the new rules.