The true cost of compliance
The cost of compliance in the gambling sector is frankly staggering, and it’s being exacerbated by friction through the onboarding and player verification process. Churn remains high among operators, leading to lost revenue as well as the compliance costs incurred.
Such is the importance of compliance, many operators have dedicated teams and are investing heavily in building platforms, tools and processes in-house, from the ground up. This can be effective, but it is painfully expensive.
The alternative is a risk orchestration platform. Although a relatively new concept, risk orchestration is growing quickly in popularity thanks to its ability to bring together multiple data and technology providers via a single API, delivering enhanced risk decision-making for businesses and a seamless end-to-end journey for customers.
We manage risk in-house, so why would I invest in a third party?
To create a fully functioning orchestration platform in-house, the year-one cost alone requires a multi-million-pound investment. For mid-tier operators that would likely require raising capital or securing a private equity investment. In the current economic climate, this is easier said than done.
Then there is the need to attract and secure the compliance and development talent required to build and implement the platform for KYC, AML and compliance activity across the organisation.
And the costs don’t stop there. After the first year, ongoing maintenance is required, as is further development and iteration of the platform. This takes resources and budget, often pulling it away from other areas of the business such as product development and marketing.
Operators also need to be mindful of the infrastructure required to run a compliance platform and the costs associated with securing licences and approvals in the markets they wish to target.
Finally, there are the suppliers and vendors they will end up working with. These all require contracts, integrations and management – often a huge undertaking that requires constant oversight, again taking up valuable resources and budget.
Ultimately, building a compliance platform in-house is complex and costly and can be subject to delays and unforeseen setbacks that can hamper the operator’s ability to successfully enter new markets and drive growth through international expansion.
Building these systems in-house is very demanding and could put operators at a disadvantage in terms of one-off and ongoing operational costs, as well as affecting their agility to address new opportunities and risks.
Although most in-house solutions are built with this in mind, a platform can be created to deliver the exact requirements for the specific operator’s risk model. The big question is, what could you achieve by using the time, money and resources elsewhere?
Could you develop a new game? Enhance your customer experience? Or invest more in fraud detection, marketing or revenue-generating activities?
Buy?The alternative is to partner with a specialist compliance platform provider to integrate a ready-made, plug-and-play solution into your business. Staggeringly, those who choose to do this could save up to 75% of the investment costs over the first three years, compared to building their own solution.
With the buy option, any ongoing development work is covered by the provider, which could amount to several new development releases each year.
With LexisNexis RiskNarrative, any operator can make changes to the customer journey via natural language processing, without the need for technical support. This allows them to respond quickly to customer feedback and ever-changing regulatory requirements. Indeed, being more agile and responsive is one of the biggest up-sides.
Operators can also be proactive with regulators and show willingness by implementing changes quickly or even offering to work with the regulator on sandbox issues.
This flexibility and simple configuration is crucial when it comes to entering new markets, helping remove friction in any customer journey and enabling operators to deliver a seamless player onboarding process, more easily.
In such a competitive market, this can make the difference between retaining a customer, or not. If the player experience doesn’t live up to expectations, they will simply sign up with a rival brand.
Working with a single platform provider, operators can reduce their reliance on third-party vendors and suppliers freeing up resources and budget for product, marketing and other value-adding activities.
But the savings don’t stop there. Huge cost and time savings can be unlocked when it comes to licensing data and analytics tools and integrating new suppliers. In the case of the North American market, each state has different regulations and approved suppliers, which could entail a huge investment to establish a bespoke blend of contracts, processes and integrations for each market.
With interest rates and inflation remaining high, the cost of doing business is rising all the time. Operators need to find effective cost savings that don’t impact operating volumes or the ability to serve customers – the compliance platform is where real value can be unlocked.
More effective risk management?
Working with a compliance platform specialist removes complexity and manual actions from risk management, allowing the operator to focus on revenue-driving activities and levelling up the customer experience – both of which can turbo-change growth.
Even for operators that have already built their risk orchestration platform in-house, there are plenty of opportunities to optimise and save money over the next three to five years, especially when it comes to the maintenance of their platform.
At LexisNexis Risk Solutions, we work with operators to help them unlock their investment in technology and data to better protect customers and the business against losses, including the heavy fines that are being handed down for non-compliance.
A compliance risk platform provider’s role is simple – work with partners to ensure their investment in anti-fraud and financial crime tech and data pays off by delivering efficiencies for the business, while protecting players at all times.
Adam Doyle possesses over fifteen years of experience in identity management and fraud specialising within the gambling industry. As Lexis Nexis Risk Solutions head of gaming, his experience, knowledge and contacts in the gambling sector is outstanding.