The amount of online gamblers using VPNs to circumvent geo-restrictions is growing, and we look into why UK gambling companies have been cautioned to get their act together if they want to keep their core clientele in an ever-changing market.

In terms of technology, internet betting in the UK has never been simpler. Assuming you aren't living in the nineteenth century, you very surely have a smartphone and a broadband connection on your computer.

Once Covid-19 has passed, Britain plans to launch a new 5G network to improve people's connectivity. And with it, more options to wager online via a variety of gaming sites and apps.

The Gambling Commission discovered that remote betting now accounts for approximately 37% of UK gambling activity, primarily through online browsers or applications. The ability to wager without requiring a desktop computer or adhering to the opening hours of your nearest betting shop has revolutionized gaming, whether in sportsbooks or online casinos.

Nonetheless, despite the surge in betting apps on the home market over the last decade, warning flags for the UK gaming sector are emerging.

Last year was a watershed moment in British gambling, with Gaming Commission numbers showing remote gambling revenues falling for the first time, from £5.6 billion to £5.3 billion. Although they are still healthy figures for the business, executives will have seen the dip and will not want it to continue.

Higher taxes, regulatory reforms, and increased media attention of the deleterious effects of problem gambling, such as the rule change on fixed-odds betting machines, all contributed to the income drop.

Indeed, the UK's largest betting companies - William Hill, Bet365, Coral Ladbrokes, and Paddy Power - have committed to increase their levy paid to the Gambling Commission to £100 million per year, a full £30 million more than requested.

While taxes, legislation, and problem gambling may be the most prominent concerns that UK and European corporations face, another thing that gaming companies should be aware of is punters departing native markets for more appealing propositions elsewhere.

That is the warning of Zac Cohen, COO of Trulioo, which provides ID verification solutions to gambling operators worldwide and recently commissioned the Online Gaming and Account Opening Report 2020, which revealed that 11% of UK/European clients had opened a US-based account. A additional 17% intend to open one.

"Globally, there is a big opportunity for online gaming companies, and time is important for them to achieve market share," Zac says Gambling.com.

“Many of today’s consumers have an international mindset and no longer feel restricted to the borders of a market or country as reported in the survey – 44% of online gamer respondents have created accounts on an online gaming site hosted outside their own country in the past two years.”'

Since the rise of internet gaming and betting in the 2000s, the gambling industry has exploded. Within the first five hours of Apple's App Store's opening, Texas Hold'em was one of the most popular games downloaded.

Over the last decade, as smartphones became more widely available, global revenue from mobile gaming apps increased from $34.8 billion in 2015 to a predicted $74.6 billion this year. The global market would very definitely be much larger today if the United States had not banned internet gambling in 2006.

The availability of smartphones prompted British gambling companies to develop their goods and launch innovative sportsbooks and casinos to a global market. This is still going on today.

Through the revolutionary App Store, Apple facilitated the rise of mobile gambling. In-play sports betting, live streaming, live casino games, and immersive slot machines have evolved over the years to provide punters with a full suite of attractive betting options across numerous sites, all of which can be accessed away from your desktop or a betting shop.

And the market is constantly shifting. In a world that is shrinking due to technological advances, UK firms face increased competition from abroad. As punters transfer their allegiances away from the domestic market, UK betting companies should aim to follow suit.

So, why are gamblers looking to wager abroad? Well, it's not just the option to bet outside of a country's jurisdiction that draws players. Choice is the driving factor in online betting, just as it is in buying goods from the other side of the world, having food delivered from a limitless number of restaurants, and watching TV produced by foreign networks at the press of a button.

"In general," Zac says, "online gamers are looking to engage with operators outside of their own jurisdiction if they give faster, less intrusive opening processes and greater security."

“Additionally, punters are always looking for new games of chance and new gaming experiences; the biggest factor for opening accounts outside of the country of residence is more choice of games (48%).”

However, with this desire for more options comes a problem for the consumer.

"The urge for fresh gaming chances frequently outweighs the demand for security or legality," Zac says. "While players rarely encounter legal concerns with offshore gaming, it can be illegal or a murky area depending on the jurisdiction." If problems develop, these gamers will have limited legal redress.

"Giving players access to new games in a safe and secure environment is a better approach for the industry to generate revenue while preserving its interests."

Indeed, secure gambling is set to earn much greater focus in the years to come as the United States opens up its regulations to remote gambling and sports betting. All eyes right now are on America – a remote gambling industry that in 2018 was worth $13bn is predicted to hit $149bn by 2023.

A handful of EU and European companies – namely William Hill and 888 – have managed to gain a foothold in the US market. Indeed, such is the interest in sportsbook betting on both sides of the Atlantic – with particular focus on NFL – more firms are expected to follow.

But security is likely to be scrutinised even more as governments at national and local level invest increased resources into the harmful effects of problem gambling. Striking a suitable balance for both industry and regulation may take time, especially in a country like America that has outlawed online gambling for so long.

And yet, the attractiveness of expanding markets will always be of interest to big firms, no matter the regulatory hoops required to jump through.

“The math is simple – more than half of online gamers have opened three or more accounts in the past two years, and 59% expect to have a greater number of accounts in 12 months,” says Zac. “Hence the opportunities to acquire a new customer base are endless for gaming operators that can offer a safe, seamless and speedy account opening process.”

With new gaming opportunities being the core push for players, gambling firms are naturally inclined to create more diverse and entertaining products. All the while, legislation and social attitudes towards gambling check these balances.

 

Punters Escape Geo-Blocks At Their Own Risk

 

This leads to the issues UK firms have on players creating offshore accounts. How easy it is to set up foreign betting profiles remains tricky to gauge. America’s online gambling industry is emerging at a state-by-state pace, with individual states providing their own jurisdiction on punter locations.

Yet the worry remains that the global industry is lagging behind technology, with many punters using VPNs to circumnavigate geo-blocking technologies.

And punters seem happy to do this despite the legal issues and lack of protection involved.

“While geo-blocking technology is becoming increasingly sophisticated, there is a strong indication that punters are actively finding ways to bypass it to place bets on offshore sites,” says Zac.

Punters and technology experts are battling for supremacy in the world of geo-blocking
“So far, VPNs seem to be the way that they’re attempting to circumvent geo-blocking technology, since they allow punters to get around and play in websites that they normally wouldn’t be allowed to access based on their local online gambling laws.

“It’s worth noting though that any time a punter goes with an offshore betting operation, they lose all legal recourse. While there are some offshore operators that are interested in building a long-term reputable brand, it's often not easy to distinguish the good operators from the bad. Without doing their own due diligence, which the average player does not want to do, it's safest for them to play within their own jurisdiction or play with larger, well-known gaming brands.”

So, with geo-blocking technologies easy to override, there appears no limit to how far punters will look to find their preferred gambling sites and apps. Pressure on UK and European firms to compete against other emerging markets – whether it be the US or elsewhere – is growing by the year.

Expansion while protecting your core customers seems to be the obvious path.

“Regardless of where the online gaming operator is based, customers are looking for world-class customer experience,” says Zac.

“Even though the Trulioo report only surveyed the UK and US markets, it’s clear that consumers all over the globe are unsatisfied with their experiences. Businesses that have the ability to customise their website, onboarding process and payment methods will eventually attract more consumers, whether they be in the UK, China or Brazil. Right now, however, the online gaming industry still has a way to go before it can genuinely claim to offer first-class digital onboarding experiences to gamers.”

It remains to be seen how UK and European enterprises will perform in the future. Many businesses are noticing a decline in revenue as more people, particularly younger generations, switch to remote gaming. Betting establishments are rapidly becoming outdated.

Meanwhile, phone apps now provide access to online items such as live casinos, global poker tournaments, and in-play sports betting. The success of companies that produce mobile products that adhere to various regulations while still giving the number of betting possibilities, security, and safety that punters seek could determine the industry's future progress.

Industry consolidation may also continue. Several European enterprises have merged in the last five years. In 2016, Ladbrokes and Coral combined, only to be purchased by GVC two years later. Paddy Power and Betfair merged in 2016, and William Hill and 888 have also recently purchased smaller enterprises. Greater market influence and lobbying power come with increased corporate share.

We can see from the Gambling Commission's voluntary levy hike that businesses want to stay on the right side of the law as well as societal perception. As a result, expansion comes with responsibilities.

In terms of whether offshore gaming can aid in money laundering, Zac believes betting companies must be alert and committed to uncovering and eliminating the practice.

"Ultimately, the gaming sector is under increasing pressure to ensure that revenues from money laundering do not permeate their operations." In the European Union, for example, the 5th Anti-Money Laundering Directive (5AMLD) went into effect, mandating gaming companies to implement AML processes. In the United States, AML-related fines totaled $110 million over the last four years, and with the expansion of the sports betting market, that figure might skyrocket.

"In addition to legal restrictions, allowing money laundering harms the industry's brand and may sway public sentiment against additional gaming prospects." To advertise themselves as fair and honest businesses, operators must set clear and effective measures to prevent unlawful monies from entering their systems."