ICE World Regulatory Briefing - Changing mindsets

03 February 2020

Speech by Neil McArthur at ICE World Regulatory briefing 2020

Thank you. My name is Neil McArthur and I am the Chief Executive of the Gambling Commission.

I want to talk to you about three things:

why we need to make gambling safer
what I see as the opportunities to make gambling safer and the risks if those opportunities are not taken
and how I think a change of mindset can help us – regulators, operators, advisers and suppliers – make gambling safer

Why is change needed?

Let me start by setting out the case for change.

The last decade has seen strong growth for the gambling industry, largely as a result of the growth of online gambling. Take a look at this chart.

gross gambling yield has risen although may be showing signs of maturity. In 2008/09 GGY for the sector stood at £9 billion. By 2018/19 this had risen to £14.4 billion
participation in gambling is declining. In 2012 participation in gambling (in the past 4 weeks) stood at 57%. In 2018 it had dropped to 46%
and trust and confidence in gambling is down. This is not a short term or recent issue. In 2008 49% of the population agreed gambling was fair and could be trusted. In 2018 that number had shrunk to 30%.

Let’s focus on that growth in online gambling a bit more.

Consumers have moved online

that creates new risks and opportunities
consumers are also moving to use their phones more and more
that clearly changes the risks; it changes where and when people gamble, because their phone is always with them
consumers are also moving to play slots and other high intensity products, such as in-play betting
that shifts the risk profile as well.

And whilst the risks are changing, we have to acknowledge that we are not starting in a good place:

The 2016 Health Survey, which is the most robust data we have, shows that there are around 340,000 problem gamblers in Great Britain.

this is totally unacceptable
it says there are another 1.7 million people at risk of becoming problem gamblers
again, this is totally unacceptable
and neither of these statistics fully account for the many other lives, families and communities that are impacted by gambling harms.

It is, quite frankly, a wholly unacceptable state of affairs and we need to see these numbers radically reduced.

What opportunities exist to make gambling safer and what are the risks if things don’t improve?

I became CEO of the Gambling Commission in 2018. My appointment coincided with the commencement of our new corporate strategy.

It was clear then that change was required. We had already begun to introduce a much tougher compliance and enforcement regime. We did that because we needed to significantly change the behaviour of operators and those who run them:

we needed to disrupt old ways of thinking and acting
we needed to put a marker down that there were far too many failures, too many repeated instances of lessons not being learned and – frankly – standards were not good enough.
In short, we deliberately set out to disrupt the market
And we have disrupted the market:
we have imposed more than £30 million in penalty packages since 1 April 2018
we have revoked 6 operating licences
we have revoked another 2 personal licences and we know there are operators and Personal Management Licences who surrendered their licences because they could not meet our standards.

We also published our Online Review in 2018. That set out a forward work plan, which we have been pursuing - and will continue to pursue, whilst taking account of emerging risks and issues. That work plan included four key policy actions:

action on unclear and/or unfair terms and conditions
action on age verification
action on customer identification
action on and ineffective customer interaction.

And we have taken action

worked with the Competitions and Market Authority to strengthen rules around unfair terms and conditions
strengthened online age and identity verification requirements to further protect those at risk of harm
strengthened the requirements on businesses to interact with customers at risk of or experiencing harm.

In the Online Review we also specified five areas where we promised to undertake further work. These were:

first, to consider whether gambling on credit should continue to be permitted
secondly, to consider whether we need to make changes to LCCP in order to ensure that consumers can withdraw funds more easily
third, to assess the effectiveness of the current consumer protections, including issues like online stakes
fourth, to review game and product characteristics to identify whether particular features pose greater risk of harm than others
fifth, we said we would review our requirements on the protection of customer funds and consider whether there are sufficient protections around dormant accounts.

I have to accept, however, that a regulator cannot see every angle of every problem; nor can we unilaterally devise solutions for every challenge we face.

If we are to solve complex problems, we need to look at the problem from as many different angles as possible.

That requires collaboration and I am prepared to work with anyone who shares my determination to make rapid, positive changes to protect consumers from harm.

I am really interested in the effect mindset can have on performance.

One writer I think has a lot of interesting ideas, which will help me expand on this point, is Matthew Syed. He points to a tendency we all have to be attracted to people who think and often look like ourselves. This in turn can mean such a group of like-minded people will have blind spots when problem solving.

It has always been clear to me that we are likely to get better answers to complex questions if we seek out people with as rich a diversity of background, outlook and opinion as possible. This may lead to disagreement, but constructive disagreement can and will lead to a better grasp of the problem and to better solutions.

Should a regulator collaborate with the people it regulates?

The idea of collaborating with operators has turned out to be quite controversial.

I understand why some people would be sceptical about this approach. Gambling operators have not done much to enhance their reputations: until very recently too much emphasis has been placed on public relations and too little focus on actually addressing the pressing public health challenge that gambling related harm presents.

Gambling related harm is now recognised as a public health issue. That is an important change and I think it presents an opportunity to turn the change in tone from the top in operators into tangible actions that will benefit consumers.

I will discuss these initiatives shortly, but I want to be clear, that this is not ‘self-regulation’.

operators will not get to mark their own work
we have set the agenda and focussed the operators on issues of our choosing
we will judge whether the proposals go far enough and whether they are likely to achieve the outcome we want: namely reduced risks of harm to consumers
and if they don’t, all options are on the table for what we do next.

As I have said before, consumer behaviour and technology are changing so quickly that small incremental improvement will not keep pace with emerging risks or opportunities.

That is why last October, we launched four initiatives which have the capacity to deliver real and rapid change for consumers in key areas of risk. They all rely on collaboration and by this Spring’s Raising Standards Conference, we expect to see progress:

First, Product and Game Design:

we have challenged the industry to work together to produce an effective Industry Code for Game Design
we have two teams of 10 operators working on this challenge.
my challenge to them is to be bold, to grasp nettles and turn words into action.

Second, Incentivisation of high value customers

we have accepted offers from industry to lead the development of a code of conduct in this area as well
we have 10 operators working on this challenge
again, they must be bold
VIPs have figured too heavily in our enforcement work therefore is needed.

Third, the use of Ad Tech

we are exploring with operators how they can make better use of technology to minimise the risk of exposure of gambling advertising content to children, young people and vulnerable adults
and again, operators must be bold
change is needed to protect people

The final challenge is the challenge of developing a ‘Single Customer View’

this has the potential to be extremely powerful for player safety
we are working with operators and the ICO to look at how progress can be made.

When I discussed these initiatives in another speech, two weeks ago, some responded with concern. It was suggested that this approach was in effect, the regulator handing responsibility for regulating part of the industry to the operators. Nothing could be further from the truth.

To repeat, we have set gambling operators these challenges and they are not an opportunity for gambling operators to set or mark their own homework.

What is interesting is that many operators involved in this work have been subject to serious enforcement investigations and sanctions. On the face of it, this seems contradictory, but as I see it, they are in no doubt about the need to tackle these issues at speed. Nor do they doubt the consequences of repeating past failures.

Seen in this light, I think the working groups are more akin to an extension of the ‘polluter pays’ principle. Operators have created the problem and they need to put their time, money and other resources into fixing it. And, the working groups are also, in that sense, ‘peculiar’. They are intended to be. We are trying to disrupt old mindsets and ways of working to create positive change for consumers and approach the challenges we face in a different way.

But there is another, vitally important, part to this story.

As I said earlier, the strength of collaboration is bringing together a diversity of opinion and perspectives, which is why it is so important that we bring people with lived experience of gambling harms into our work.

But as these initiatives progress, we will be consulting with people with lived experience of gambling related harm. I don’t think we explained this clearly enough when we made an announcement about the challenges, by lived experience I mean people who have had first hand experience of the harm gambling can cause, direct or indirect. In March, ahead of the Raising Standards Conference we will stress test the initial output of these initiatives in a workshop with people with lived experience. Their feedback will be critical in giving these initiatives a chance to succeed. This forms another step in the Commission’s wider commitment to bring people with lived experience into our work.

We will examine the proposals from the working groups. We will take account of the insights from people with lived experience of gambling harm, the advice of the Advisory Board for Safer Gambling and members of our Digital Advisory Panel. We will then decide what regulatory changes should follow in LCCP or Technical Standards. And, we will do that rapidly.

Over the last few years, the biggest gambling operators have tried to demonstrate their commitment to safer gambling in a variety of ways.

This is a welcome development, as is the change in tone coming from the Betting and Gaming Council in particular. But having the ‘will’ to do something is only half the battle. You also need to know the ‘way’. The more complex and rapidly changing the environment the more important it is that everyone has a shared understanding of the purpose of specific initiatives or projects. As well as a clear understanding of what is expected of them individually in contribution to that success.

As a regulator we can give ‘direction’. We can show the ‘way’ to collaborate effectively to address complex challenges. That is why we – at the Gambling Commission – are trying to channel everyone’s energies into how we can make rapid progress which will help consumers by making gambling safer. We are trying to show operators the ‘way’, through the initiatives I described.

I am sure collaboration can and will deliver better outcomes. Everyone involved sees the problem from a slightly different angle, giving a different perspective on how to solve it. But collaboration and the interaction that goes with it drives a change in culture. At the Gambling Commission we think this is key to changing the outlook of gambling operators that are active in our jurisdiction. If we want operators to put consumer safety first, we can’t just use the big stick of enforcement. We need to get them thinking about their role differently and thinking about their customers differently.

We need to move quickly. Regulation has to keep up with emerging risks and issues, as well as reducing known risks and problems therefore gambling related harm is a real and present danger.

We know that consumers are:

moving online
moving to play via their mobile phones
moving to play slots and other, faster, more intense products like in-play betting
we know that younger, highly engaged, consumers – those under 25 with multiple gambling accounts – are already a high-risk group
we know that the public are concerned about the impact of gambling advertising on children and vulnerable people.

In my first speech as Chief Executive, I said that I thought we needed a greater and more diverse range of views brought into solving the challenge of gambling related harm. I still think that. We are trying to disrupt old mindsets and ways of working to create positive change for consumers. Especially in reducing gambling harms.

Gambling related harm is a complex issue, but I am convinced that gambling can be made safer if we harness the power of technology and change people’s mindsets within the industry, in particular.

In his book, ‘Black Box Thinking’, Matthew Syed described the need to: “…create systems and cultures that enable organisations to learn from errors, rather than being threatened by them.”

In a nutshell, that is the regulatory system we are trying to create in Great Britain. Creating that system – that culture – requires all of us to the change our mindset.

Don’t misunderstand me. We will get tougher and tougher if we need to and of course, our compliance and enforcement work will continue but the time to think of this as a competition between ‘poachers’ and ‘gamekeepers’ has gone. Gambling related harm is a public health issue. It needs a comprehensive public health response. We all need to see ourselves as working to make gambling safer. We each have a different part to play, but that must be our goal. If that isn’t anyone’s goal they need to leave the industry.

Making gambling safer is the Gambling Commission’s goal therefore we stand ready to work with anyone who shares our determination to reduce gambling harms. To make gambling safer for consumers. I look forward to working with you all to do just that.

Thank you.

Last updated: 18 January 2023

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