Online gambling in an ever-changing regulatory world

New regulations set to come into force on July 1st will have a significant impact on the online gambling industry in Germany. They will promote responsible gaming, making the industry safer for users and fairer for operators that comply.

But coming amidst a spike in online gambling activity will make it even more important for operators to get it right. Processing high volumes while still complying with regulations will be critical.

An expert panel from IDnow and operator GVC-Entain, came together recently to discuss these regulations, implementation challenges, and the future benefits for the industry.

New Germany gambling regulations

As anyone in the gaming industry knows, regulation differs significantly between countries. Gambling in Germany is governed under the Interstate Treaty on Gambling law, and online gambling is heavily restricted.

New German gambling regulations will come into effect from July 1st, 2021. This will open up the online gambling market to new operators, but with many requirements for safe gambling. The regulations will impact many areas of online gambling – including onboarding and verifying users, moving to deposit limits, controlling advertising, and equal taxation for the industry.

Promoting responsible gaming

A major focus is to promote safer gambling. This includes protecting those who are underage, controlling advertising, and moving gambling away from the black market. Players will further be addressed with a database introduced to monitor user and operator interaction.

There will be uniform regulation across all states under a central gaming authority based in the state of Sachsen-Anhalt. Licensing will transfer to this authority in 2023.

Regulations will be challenging for some operators

Some areas of the regulations are more contentious. The introduction of a uniform tax rate of 5.3% on turnover is a key example. How this will play out in particular for smaller operators and new entrants to the market remains to be seen. During the webinar, Rayissa Armata, Head of Regulatory Affairs at IDnow, explained how this taxation is likely to be challenged.

Over the course of the webinar, we also shared experience of working with operators in such restricted markets. We were highlighting how some operators, particularly smaller ones without the proper knowledge, choose not to enter these more regulated markets. Participants agreed that we will have to wait and see how this plays out as regulations come into effect over time.

Changes will take time to be fully implemented

The new regulations come into force on July 1st. But it will take time for many of the changes to be introduced and for operators and the regulator to see the effects, with many areas experimental for the first year or more.

Rayissa explained how the introduction is a great first step, but there is much more to follow. She told the webinar:

“Some requirements are hard and strict and go into effect straight away, and other aspects of these requirements will develop over time.”

Some KYC and verification rules will come into effect immediately, for example. But moving from stake limits to deposit limits will be transitional, as will the introduction of a database.

KYC is a vital part of the changes

One of the most important parts of the new regulations is the onboarding and verification of users. As the industry moves to be safer, proper verification of users by all operators is vital. Transition phases for this have been in effect since October 2020, but regulations will be strengthened from July 1st.

Checks will include the verification of the user’s name, address, and date of birth. But KYC is about much more than just mandatory identity and age checks. It is also intended to prevent fraud, offer security, promote high conversion rates, and help operators avoid regulatory fines.

Important to balance regulations with user experience

Furthermore, we explained in our webinar how these KYC changes could impact users. The extra steps created during onboarding take time out of the user experience and can even create a sense of anxiety.

This experience is not uncommon. In fact, similar user behaviour has been seen in the crypto sector already where users were previously not used to being verified.

Using technology in the right way can help make the process as timely and seamless as possible.

Operators can make the most out of KYC

An important point to keep in mind is that proper KYC can help operators stand out as reputable.
Roger Tyrzyk, Director Global Gambling & Sales UK with IDnow, explained how it is important to “see KYC as an enabler rather than a distractor – nowadays people appreciate when they are being checked on.”

And Martin Lycka, SVP Compliance at GVC-Entain, supported this from an operator point of view. He noted that in some cases, it can be challenging to find the right balance, but in the long run, operators that embrace it will benefit.

Changes coming amidst a spike in gambling

These new regulations will be particularly impactful as they come during a period of high online gambling activity. Implementation will come mid-way through the Euro 2020 championship, with large spikes in activity expected.

Nevertheless, it is not possible to simply dismiss the impact of the past events and the huge rise in online gambling with people watching from home. While sharing how betting at the 2021 Grand National was up 28% from 2019, we came to learn this conclusion:

“If we look at the Grand National, we’ve had an all-time record in the amount of volume we’ve seen in betting just on single events across exchanges and sports books of 92.8 million that was traded on the big races, that made up a 71% increase across the three-day festival.”

Onboarding a high volume of customers while complying with regulations presents a challenge. Martin provided some perspective from an operator’s point of view. He discussed how the launch might not be so straightforward with the date clash, but their systems are prepared for it.

He also expects that the phased introduction of the regulations will help with this, and the expected transition of existing licenses will ease the burden.

Responsible gambling in Germany is critical to industry success

Looking ahead beyond July 1st, though, what is the expected future impact on the gambling industry?

Martin provided some excellent context on this from an operator’s point of view, explaining his view that “Responsible gambling is absolutely critical to the long-term sustainability of in the industry. ”

He explained further how “We do see regulation as an opportunity to create markets that are sustainable in the long run company.” Currently, 99% of Entain’s revenue comes from regulated markets, or those with upcoming regulations.

He also stressed that to make it work, it will need to be implemented to the highest level of responsible gaming standards, and German authorities will need to take action against those who choose not to comply.

Going forward, there will be more benefits seen from verification. As users get more used to it, and operators handle higher volumes and greater accuracy, security should increase, and fraud will become harder.

There is plenty more to understand about these new regulations and their implementation. For some more insight from the experts, watch the full webinar.

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Online gambling in an ever-changing regulatory world 1

Razia Ali
Senior Account Manager Global Gambling
Connect with Razia on LinkedIn

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