Understanding Consumer Transactions in Illegal Gambling Markets

Exploring Illegal Gambling Through Financial Transaction Data

Postdoctoral Data Scientist Steven Murphy introduces the latest instalment in a series of reports examining the illegal gambling market in Great Britain, which focuses on illegal gambling in financial transaction data.

As part of our corporate strategy focus on using data and analytics to make gambling regulation more effective and our ongoing work to better understand the illegal gambling market, today the Gambling Commission has published a new technical report on consumer behaviours and harms associated with the unlicensed market. Following our update in April about trends in the illegal market and our methods for estimating them, this report uses our Open Banking dataset to identify specific transactions between consumers and illegal gambling companies in Great Britain and consider the associated harms and financial behaviours.

Whereas much of the available research into the illegal market uses techniques like web-traffic estimates, online surveys and focus groups to provide insight into the illegal market, our latest research uses a large, anonymised dataset of financial transactions from Great Britain residents’ bank accounts. This has the benefit of enabling direct observation of consumer behaviour in the illegal market, in contrast with most of the available evidence which relies on estimates or indirect reports. It is part of the Commission’s continuing efforts to explore the opportunities to understand illegal gambling from a wider variety of datasets and reflects our view that no single source of evidence should be treated as definitive, particularly when they relate to a complex topic such as illegal activity.

Consumer Behaviour, Harms, and Future Outlook

One area where this report adds to the evidence base is the movement between the licensed and illegal gambling markets. When we look at the average numbers of transactions with licensed companies in the months before and after we first detect an individual transacting with an unlicensed operator, we do not see a notable drop in the levels of engagement with legal operators afterwards. This is consistent with findings in our earlier Consumer Voice research that illegal gambling activity is usually supplementary to legal gambling and challenges the notion that engagement in illegal gambling is a direct substitution of legal activity.

As this unique cross operator dataset derives from an existing panel of individuals, we can link to the results of surveys, including Problem Gambling Severity Index (PGSI) scores. This enables us to add to the evidence on gambling harms suffered by many people who use illegal gambling companies, considered in the context of their actual financial activity. It may be the first time such an analysis has been completed by any regulator or research team in the world.

We compared the distribution of PGSI categories for people who interact with illegal operators with the wider group of people for whom we only detect licensed gambling transactions. The relative sizes of the low risk, moderate risk and problem gambling categories are reversed compared to the population of gamblers with licensed companies. This result implies that consumers who use the illegal market may be at a relatively higher risk of gambling related harm than people that only use legal gambling opportunities.

The report notes several caveats, such as the fact we believe there may be undetected transactions with unlicensed operators and the dataset, though large, is not nationally representative, which place some limits on the breadth of insight that we can draw. However, this research represents a powerful proof of concept for the use of financial transaction data to better understand illegal gambling in Great Britain and elsewhere. It represents a meaningful contribution to our evidence base on illegal gambling that could not be realised from any other evidence source, demonstrating the strength of the Commission’s strategy to draw on the broadest possible range of evidence. Moving forward, we will continue our work to expand our use of financial transaction data, remaining open to collaborations with stakeholders in the financial sector and beyond, including banks, payment providers and other organisations with a shared interest in ensuring that gambling in Great Britain is safe, fair and crime free.