Swedish researchers study responsible gaming prompts
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Study: Deposit Limits A Good Indicator, Bad Solution For Problem Gambling Online

responsible gambling

Finnish online gambling operator Paf announced that it will lower its annual loss limit for customers from €30,000 to €25,000 beginning next year.

The decision stems from the results of a study it conducted in conjunction with Stockholm University. It found that allowing players to set their own deposit limits is largely ineffective in curbing problem gambling.

See the published study here.

Mandatory loss limits are uncommon in the industry, to say the least. Paf says it was the first online gambling operator to implement one in 2018, and it’s not hard to understand why it’s so rare. Imposing the initial limit cost the company €4 million in annual revenue, a tradeoff few private companies are willing to make.

Paf is a different sort of entity, though, being government-owned and with its profits directed toward charitable causes. Its findings and strategies may be instructive, both for private gambling entities and for the government agencies that regulate them.

Paf commissions responsible gambling study

Paf is based in the Åland Islands, a Swedish-speaking autonomous region of Finland. It was founded in 1966 by the Finnish Public Health Service in conjunction with a group of charities, including the Red Cross.

The company’s stated goal is to promote responsible gambling and use the profits to support public health initiatives. It opened one of the world’s first online casinos in 1999 and has since broadened the scope of its mission, allocating grants to a variety of local projects.

In 2015, Paf entered into a joint research project with the university to study harm reduction for problem gamblers. The project had three primary areas of focus:

  • Effectiveness of voluntary deposit limits.
  • Player attitudes toward responsible gaming tools.
  • Patterns of behavior that lead to self-exclusion.

The subjects of the study were new Paf customers registering in 2016 with slots as their preferred category. Researchers randomly split each player into one of four groups. A control group had access to the same deposit-limit tools as other players but received no prompt to use them.

The other three groups were prompted to set a self-imposed limit at varying points in the process:

  1. During initial sign-up.
  2. While initiating their first deposit.
  3. Just after completing their first deposit.

In all cases, players had the option to remove or increase the limit they’d set on a seven-day delay to allow time to “cool down” and reconsider.

Preliminary findings are eye-opening

So far, the only published results relate to the first area of research. The group found that voluntary deposit limits, whether prompted or not, have no meaningful effect on the frequency with which players gamble or their average losses.

The results indicate that earlier in the process a player receives the prompt, the more likely he or she is to set a limit. Unsurprisingly, it also found that a prompt at any point made a limit more likely.

For the prompted groups, however, researchers found no significant difference in playing frequency or net losses between players who elected to set a limit and those who did not, regardless of when they delivered the prompt.

According to Paf, that result is the reason for its decision to lower its universal loss limit.

“This new research reaches a terrible conclusion,” said CFO Christer Fahlstedt. “It shows that one of the most common tools for responsible gaming — setting your own voluntary limits — is worthless and does not work. That’s why we have chosen to lower our fixed mandatory loss limit further because it has a real effect.”

Control group players who sought out and set a deposit limit unprompted, on the other hand, lost almost five times as much on average as players who did not. Furthermore, players in all groups who set a limit and subsequently removed or increased it tended to be bigger losers than those who did not.

A signal, but not a solution

Don’t mistake correlation for causation in interpreting the results.

Setting a deposit limit unprompted or removing/raising an existing one doesn’t provoke problem gambling. Rather, the players most likely to seek out responsible gambling tools without a prompt — such as a deposit limit — tend to be those who’ve already lost too much.

According to the research, removing or increasing a self-imposed limit is an indicator of problem gambling habits. It’s therefore possible that a stricter policy for raising or removing a limit once a player sets it could be more effective in curbing the behavior.

Based solely on the results of this limited study, it also seems that self-imposed voluntary restrictions don’t do much to curb problem gambling on their own. If anything, they’re a more-useful tool for identifying it.

Prompting players to use these tools obfuscates the diagnostic usefulness of the feature by inducing responsible players to set limits they might not have exceeded in any event.

Counting the whales

The results of the study are interesting in their own right. However, Paf has also taken the uncommon step of releasing data broken down by segments of players and their average losses. Those numbers illustrate just how heavily the online gambling industry relies on what Paf calls “big players,” or what are more commonly known as whales.

Before even looking at those numbers, it’s telling that Paf says it lost €4 million in revenue by imposing an annual loss limit of €30,000 (and expects to lose another €2 million by lowering it again). That suggests that up to 400 players hit that cap — and Paf is just one site, serving fairly small Nordic markets.

In 2017, before the cap was applied, 0.2% of Paf’s players were losing over €30,000 annually. A further 0.6% were losing between €15,000 and €30,000. Between them, 0.8% of total users accounted for almost one-third of the site’s net winnings and about 43% of gross losses by players (ignoring net winners).

Only 0.08% of players hit the cap after its implementation, suggesting that it may have provided some psychological incentive for players to slow down. Or, more likely, about half of the site’s high rollers left to gamble somewhere without a cap.

Ethical and economic complexities

The revenue distribution for other operators figures to be similarly top-heavy. And as Paf says, that’s bad for both sustainability and social responsibility.

Yet the problem is subtler and more complicated than even Paf makes it out to be.

Net losses aren’t the whole story, for one thing, and not every whale is a problem gambler. Someone losing €30,000 could simply be a wealthy player gambling responsibly at stakes that are appropriate for their bankroll.

Conversely, €1,000 per year could be the tipping point for someone already struggling with debt or on the verge of more serious problems.

Additionally, responsible gambling measures are only fully effective when every operator is on board. We could draw a parallel here with the literal whaling industry: localized attempts to “save the whales” are futile and doomed to fail if other whalers continue to hunt.

Good research begets good regulation

These complexities underscore how vital research like this is.

Private companies are profit-driven and will not always do the right thing independently. And for publicly traded companies, any decision that affects the bottom line has to be justifiable to shareholders.

Sustainable practices in an industry like online gambling (or whaling), then, require government regulation to balance individual profit against collective well-being.

The problem with regulation is that the non-experts are making the rules. Prompting players to set a deposit limit when they sign up seems like a common-sense solution, yet Paf and the Swedish researchers are showing us that it’s essentially useless.

For problem gambling regulation to be effective, the industry needs more deep-dive studies like this. That means companies need to be working with both regulators and independent researchers to get that data.

Alex Weldon
- Alex is a freelance writer and artist living in Dartmouth, Nova Scotia. He has been doing data-based analysis of the online gaming industry since 2016.
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