On 10 February 2025, the Gambling Commission provided an update on the ongoing three-stage pilot of financial risk assessments (the “Pilot”) following completion of the first Stage. In this blog, we consider the Gambling Commission’s findings from Stage 1 and what can be expected from the next Stages of the Pilot.

What is the Pilot?

Following the Gambling Commission’s consultation response of 1 May 2024, social responsibility code provision 3.4.6 was introduced requiring operators in the three highest bands of fee categories, and volunteers in the lower fee categories, to participate in its Pilot of financial risk assessments.

Financial risk assessments are intended as a way of identifying high-spending online gambling customers who may be in financial difficulty and at risk of gambling-related harm. The risk assessment is intended to be “frictionless” and to be provided by a credit reference agency. The Pilot is being used to test how financial risk assessments can work in practice and to support a frictionless customer journey, and to assess appropriate thresholds.

The Pilot was expected to take place in three stages running from 30 August 2024 to 31 March 2025 inclusive, however, the Gambling Commission can extend the Pilot period until the end of April 2025 should this be necessary for practical reasons. Stage 1 looked at historic data, Stage 2 tested “more recent” data, and Stage 3 reportedly used current data. It is important to note that the Pilot is not a ‘live test’, and consumers have not been affected.

The Pilot is testing four set success criteria:

1. Frictionless part 1: What proportion of those high-spending customers checked could get a frictionless financial risk assessment if they were introduced?
2. Frictionless part 2: How quickly could credit reference agencies return a financial risk assessment?
3. Data relevance and accuracy: Is using credit reference data meaningful for understanding of an individual customer’s current or imminent overall financial risk and financial vulnerability?
4. Implementation issues: How could the data be presented to operators to help understand the level of financial risk or vulnerabilities associated with individual customers? How could operators build financial risk assessments into their overall customer interaction processes?

At each stage of the Pilot, the Gambling Commission has been testing at least one of the success criteria, and each stage is expected to provide different results. For example, the Gambling Commission stated that “it is likely that a smaller proportion of accounts would be able to receive a frictionless assessment when using historical data”. In our view, this is likely due to historical data having limited information available compared to more current or real-time data. The Gambling Commission has stated that its final decisions regarding financial risk assessments will also be informed by other evidence and data.

Stage 1 of the Pilot

When Stage 1 completed, it was considered by the Gambling Commission as “a pilot of the Pilot”. The Gambling Commission’s intentions for Stage 1 were to:

1. Test how the Pilot participants prepared data for the credit reference agencies and how the data was returned to the Pilot participants;
2. Test the Pilot reporting tools to see if the right data was getting back to the Gambling Commission; and
3. Refine and improve its systems for Stages 2 and 3 of the Pilot and identify issues that need further exploration.

Stage 1 looked at historical data for a cohort of inactive customers, and tested customer accounts which had met high-spending thresholds during a set period. The account details were shared with one or more credit reference agencies, which provided a financial risk assessment at the point the threshold was met. Stage 1 was testing what financial risk indicators were present when the account met the high-spending threshold. The credit reference agencies are replicating how they are providing financial data to operators as close as possible to automated or live implementation.

What were the findings of Stage 1?

• Stage 1 involved more than 530,000 assessments across three credit reference agencies for approximately 300,000 accounts for the relevant year.
• Approximately 95% (503,500) of these assessments met the first success criteria of a frictionless assessment. This means that the data shared by the operators was successfully matched by the credit reference agencies, which would allow a financial risk assessment to be returned to the operator in a frictionless manner.
• Of the 95%, just over 3% were considered “thin files”, where the customer can be matched, there is no positive credit history, but the lack of negative indicators means they are considered lower risk in terms of financial vulnerability.
• Approximately 5% (26,500) of the assessments were unmatched or the data provided by operators was invalid. These assessments were not able to receive a frictionless financial risk assessment. This is lower than the 20% anticipated by the White Paper.
• Of the 5%, just over 4% of the assessments were unmatched (where the credit reference agency was unable to identify the customer and no information was available), and less than 1% were due to data formatting issues, invalid data, or duplications in the data provided to the credit reference agencies by operators.

According to the Gambling Commission, Stage 1 has primarily met the first success criterion on the proportions of customers that might be able to receive a frictionless check. It also provided insights on data quality and understanding (success criterion 3) and implementation issues (success criterion 4). Stage 1 did not look at the speed of an assessment (success criterion 2).

However, Stage 1 identified issues relating to data quality and implementation, which are to be explored further before financial risk assessments are introduced.

Data quality issues

• The quality of operator data can play a role in reducing friction and operators can take steps to reduce duplicate accounts and rectify incorrect data fields to improve data linkage rates.
• Credit reference agencies have unique systems and ways of presenting the findings back to the Pilot participants which caused some issues for the Pilot participants in assessing the findings. For example, a green RAG rating means different things across credit reference agencies.

At the time of the update, the Gambling Commission claimed that more can be done in Stages 2 and 3 to support operator understanding of different systems and allow credit reference agencies to make refinements to their models to reduce unnecessary variation or confusion. The Gambling Commission will also propose common definitions, such as time periods, to ensure commonality across credit reference agencies where needed.

Implementation issues

• Pilot participants seem uncertain about the exact actions that might be proportionate when they consider both the financial risk assessment and the information they already hold and act on for customer interaction.

The Gambling Commission has created a working group of the Pilot participants to focus on these issues with the intention of informing guidance to operators. As part of Stage 1, the participants shared anonymised case studies to help provide early insight into how the financial risk assessment could inform decision making.

What next?

The Gambling Commission’s progression to Stage 2 reportedly involved testing more recent data and refining some of the aspects tested in Stage 1. The emerging findings from both Stage 1 and Stage 2 reportedly informed the Gambling Commission’s approach to Stage 3 of the Pilot, where current data is being used.

The Gambling Commission has emphasised that its findings of Stage 1 are preliminary but it expects the interactive and collaborative approach of the Pilot to prove worthwhile in testing how financial risk assessments might work in practice before final decisions are made.

Financial risk assessments were one of the more controversial proposals of the Government’s White Paper, and it is therefore vital that the Pilot is conducted carefully and transparently. Whilst, in theory, financial risk assessments are workable, one of the industry concerns was how risk assessments would be conducted in practice. Stage 1 has already identified possible hurdles, including the discrepancies across credit reference agencies. These practicalities must be ironed out for financial risk assessments to be effective, particularly as Stage 1 demonstrated that 26,500 of the assessments were unmatched or the data provided by operators was invalid. As such, without these practicalities addressed, these assessments may still create a disproportionate amount of friction for customers and operators alike. The Gambling Commission’s update indicated that it took these findings into consideration as Stage 2 of the Pilot progressed. Whilst the outcome of Stage 1 seems relatively positive, we wait to see the outcome of Stages 2 and 3 before a full assessment on the success of the Pilot can be made.

Please get in touch with us if you have any questions about the financial risk assessments Pilot or its Stage 1 findings.