Summary:
In April 2020, the United Kingdom introduced a ban on credit card transactions for gambling, aiming to protect consumers from accumulating debt. However, new research suggests that this move may have unintended consequences, primarily increased financial harm to vulnerable consumers and challenges to the gambling industry.
For Consumers, especially problem gamblers:
The ban on credit cards for gambling has not deterred those at moderate or high risk from continuing to gamble with borrowed money. Instead, these gamblers are turning to alternative, less regulated, and more risky borrowing options such as payday loans, overdrafts, Klarna, or informal lending. These alternative borrowing sources expose gamblers to greater financial risks and exploitative lending practices, as payday lenders and other credit providers usually lack the oversight present for credit cards.
With fewer traceable payment methods, it becomes harder for regulators and banks to monitor gambling behaviours and intervene when necessary, potentially increasing harm rather than reducing it. Generation X gamblers, a key demographic heavily reliant on credit cards for gambling, face greater difficulties adjusting to the ban, and some feel it negatively impacts their gambling experience, which could push them towards riskier payment methods.
For the Gambling Industry:
The ban can lead to reduced consumer choice and a decline in gambling operator revenues, especially as the most engaged (and often highest-spending) customers are impacted by the restriction. It risks increased use of unregulated financial products, complicating the industry's ability to maintain responsible gambling standards and monitor transactions effectively.
Regulatory changes, while aiming to reduce harm, can have significant negative impacts on competition, consumer choice, and market viability if not balanced carefully; they may also increase operational costs and lower service quality in some gambling sectors.
Broader Implications:
Some reports suggest that despite bans, the overall use of credit for gambling among problem gamblers actually increased, as users find ways around restrictions, highlighting the challenge of regulating a behaviour driven by addiction. The normalization of gambling through mobile apps and advertising further complicates these regulatory efforts, since bans on credit card payments alone do not address the root causes of gambling harm or addictive behaviours.
In summary, while credit card bans on gambling aim to protect consumers, especially those vulnerable to gambling harm, they often result in unintended consequences such as pushing gamblers towards riskier, less regulated borrowing options, reducing consumer protections, and negatively affecting gambling industry dynamics. These complexities suggest that credit card bans alone are insufficient and may require complementary measures to effectively mitigate gambling-related harms.
Effective regulation hinges on well-designed affordability checks and comprehensive risk assessments. Gambling operators offer numerous deposit options beyond credit cards, such as debit cards, digital wallets, and open banking solutions. As the debate around credit card bans in gambling continues, it is crucial to consider these unintended consequences and seek comprehensive solutions to address gambling-related harms.
[1] The National Centre for Social Research (NatCen) study on the UK's credit card ban, commissioned by the Gambling Research Exchange Ontario (GREO). [2] Research and expert commentary suggest that credit card bans may inadvertently push problem gamblers towards riskier financial behaviour. [3] The role of credit card bans in gambling regulation is likely to remain a contested but evolving element. [4] Some reports suggest that despite bans, the overall use of credit for gambling among problem gamblers actually increased.
- Problem gamblers may shift their reliance on credit from regulated credit cards to riskier and less accountable funding sources such as payday loans, overdrafts, Klarna, or informal lending, exacerbating their financial risks.
- The gambling industry could experience decreased consumer choice, declining operator revenues, and increased use of unregulated financial products, making it challenging to maintain responsible gambling standards and monitor transactions effectively.
