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UK’s Credit Card Ban Could Be Disastrous for Gambling Firms

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The British gambling space is known to be one of the most heavily regulated in the modern world. The UK is notorious for being at the forefront of policing its gambling space more efficiently, and the U.K. Gambling Commission (UKGC) hasn’t been particularly shy about instituting policies that will, at times, curb the companies operating in the industry. 

However, a recent initiative by the gambling regulator to control things might not sit well with industry players.

As the Guardian reported earlier this week, the Gambling Commission plans to ban the use of credit cards on online gambling platforms across the region. 

Growing Gambling Addiction Traced to the Online Space 

As expected, the entire reason why this restriction is being considered is the rise in gambling addiction that the U.K. has seen.

According to a July 2019 article by Castle Craig, the Gambling Commission estimated at the time that 430,000 people were living with gambling addiction problems in the U.K., while an additional 2 million were at risk. 

“There could be even more, given that most people are not aware of their addictions. The most money spent on gambling is through online casinos, followed by betting shops, and the national lottery. About 35% of at-risk gamblers use online platforms.” 

So, it seems the Commission is now looking to treat this problem by going to one of its many and most significant sources, credit card payments.

While mobile gaming has made it more convenient to gamble, credit card payment is the reason why it thrives. Besides being able to gamble away life savings from the comfort of their homes, problem gamblers can apply for loans with their credit cards from banks and splash all of that away in an instant. 

Thus, to ensure that they don’t get into more debt than they need to, the Commission is putting the brakes on their ability to make credit card payments.

Gamblers could still gamble with debit cards, but given that these ones don’t have access to credit, it limits the damage to their money, not funds that they’ll find difficult to repay. 

Casino UK
Read: Unwrapping the Rise in Underage Gambling in the UK

Ban Could Cripple Revenue

However, while the incentive to shield people from the crippling financial effects of problem gambling is a noble one, there’s also the question of whether this move will provide the desired effect.

Shielding the consumer is a positive move, but who would protect the interest of the operators.

According to the statistics published by the Gambling Commission, the U.K. gambling industry made £14.4 billion (about $18.7 billion) in Gross Gambling Yield between April 2018 and March 2019.

Of this figure, online gambling took up the significant lion share, chalking up about £5.3 billion ($6.88 billion) alone; non-remote sports betting came in second, with £3.2 billion ($4.15 billion) in revenues.   

Given that a lot of British gamblers already prefer to gamble from the comfort of their homes and use credit cards to gamble, you can only imagine how much this ban will affect them. Just about all of the biggest betting companies in the U.K.- including 888, Betfair, and PokerStars- accept credit cards. 

By banning credit card payments, the industry regulator is blowing a gaping hole right through the revenue stream and operating models for these firms. This could create much uncertainty regarding the industry, leading to an exodus of companies.

Lower Revenues Would Reduce Taxes Remittance

It’s also important to note that banning credit cards will hurt the government’s purse, as well. According to the data from the Gambling Commission, tax revenues from the gambling market has been on a steady decline.

  • The country’s tax agency earned £14.4 billion from April 2018 and March 2019 represented a 0.3 percent decrease from what it made in the financial period before that.
  • As for online gambling, revenues also saw a 0.6 percent drop as well. The rate rose from 15 percent to 21 percent in October 2019.

In an expose on gambling and taxes in the U.K., Top Rated Casinos explained, 

“While UK online casino players get off tax-free, UK gambling operators aren’t so fortunate. Online casinos and bingos pay a point of income tax under Remote Gaming Duty. ” 

Going by this math, Her Majesty’s Revenue and Customs would have gotten about £7.63 billion ($9.91 billion) from the gambling industry’s winnings and £2.80 billion ($3.64) from the remote gambling industry. 

Again, all of these figures are coming from a year when revenues decreased across board. With the new restrictions, the British government itself should expect to see some significantly dwindled revenues going forward. 

Exit Strategies Aren’t in Sight for Now 

It is possible for most of these companies to pack up and move to other gambling-friendly countries (Malta, Macau, and much more), but a move of this nature is sure to take time and largely be expensive. 

The UK boasts of a growing gambling sector worth around £15 billion in annual sales, with a third of those sales attributed to online gambling.

Currently, no company has announced plans to leave the country due to these policies. So far, the only company to have exited the gambling industry is Malta-based Max Entertainment, a company whose license was revoked by the Gambling Commission last year following concerns over its financial information. While these companies can hop on and leave, there’s little evidence of such happening.

Based in the UK, Jimmy is an economic researcher with outstanding hands-on and heads-on experience in Macroeconomic finance analysis, forecasting and planning. He has honed his skills having worked cross-continental as a finance analyst, which gives him inter-cultural experience. He currently has a strong passion for regulation and macroeconomic trends as it allows him peek under the global bonnet to see how the world works. Contact him at Jimmy@beanstalk.io

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