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The Role of Financial Institutions in Gambling
Please cite as: Swanton T.B., Gainsbury, S.M., & Blaszczynski, J.T. (2019). The role of financial
institutions in gambling. International Gambling Studies.
https://doi.org/10.1080/14459795.2019.1575450
Abstract
Financial institutions incorporate social responsibility to assist customers enhance and
maintain financial wellbeing and make a positive contribution to society given the large role
that they play in customer’s everyday lives, businesses, major events, and future plans.
Financial institutions are involved in gambling through facilitating gambling transactions,
including providing credit to customers including those potentially experiencing gambling-
related harms. They have an overview of income, spending, and debt, making it potentially
possible to identify excessive expenditure on specific activities. This paper reviewed the role
of financial institutions in gambling with the aim of considering ways in which policies and
practices could enhance customer wellbeing. The Australian-focused review found limited
evidence of gambling-specific bank policies despite increases in the recognition of the impact
of gambling-related harms. Behavioural economics and psychological approaches may be
promising frameworks to guide the development of policies to assist customers in limiting
their gambling to affordable levels. Financial institutions could implement customer products
and resources to enhance management of gambling expenditure. Processes could be
established to respond to the disclosure of gambling problems and proactive strategies
developed to detect potentially risky gambling patterns. Government and community scrutiny
over the role of financial institutions in gambling will likely increase given growing
recognition of harms. A proactive effort to enhance customer wellbeing could have broad
positive outcomes for financial institutions’ social license to operate.
Keywords: gambling, banking, corporate social responsibility, business ethics, consumer
protection
Funding: This work was supported by an Australian Research Council Discovery Early
Career Research Award [DE1060100459] awarded to Dr Sally Gainsbury.
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The Role of Financial Institutions in Gambling
Since the 2008 Global Financial Crisis, financial institutions have faced increased
scrutiny over corporate governance and risk management practices (Financial Crisis Inquiry
Commission, 2011; Härle, Havas, Kremer, Rona, & Samandari, 2015). Globally, the crisis
exposed numerous failings in policy and practice that brought about serious consequences at
a macroeconomic and individual consumer levels (Reserve Bank of Australia, 2014). In
Australia, banks have been publicly criticised for neglecting to manage risk appropriately and
failing to meet emerging social expectations. This culminated in a royal commission into the
banking sector (Laughlin, 2018) with discourse related to excessive charges, imprudent
lending practices, inappropriate financial advice, and improper conduct by bank employees.
However, one area of financial institutions’ activity that remains largely unexplored is their
role in gambling. This gap is concerning considering the critical role that financial
institutions play as a conduit for gambling transactions. This is increasingly the case with the
growing popularity of online gambling which almost exclusively relies upon electronic
transactions facilitated by financial institutions (Blaszczynski et al., 2015; Department of
Social Services, 2016; Gainsbury et al., 2011; Griffiths & Barnes, 2008). As intermediaries,
financial institutions have an opportunity to instigate strategies designed to prevent and/or
reduce exposure to burdens for those vulnerable to gambling-related harms.
The prevalence rate of problem gambling is around 1% in most jurisdictions (Abbott,
Romild, & Volberg, 2014; Gainsbury et al., 2014; Wardle, Griffiths, Orford, Moody, &
Volberg, 2012; Welte, Barnes, Tidwell, Hoffman, & Wieczorek, 2015). Around six
additional people (e.g., family and friends) are affected by each problem gambler, with harms
experienced by the broader community including family breakdown, reduced productivity,
bankruptcy, crime, and poor mental health (Goodwin, Browne, Rockloff, & Rose, 2017).
Financial harms, including reduced household net worth, debt, and bankruptcy, are a primary
indicator of problem gambling (Blaszczynski et al., 2015). Reduced savings, doing without
necessities, and debt are among the five most common impacts of gambling in terms of harm
(Shannon, Anjoul, & Blaszczynski, 2017) as is worry and frustration associated with
financial difficulties (Shannon, Anjoul, & Blaszczynski, 2017). In Australia, problem
gamblers were estimated to contribute AUD $6.15 billion to gambling revenue in 2011/12,
with many incurring sizeable debts in proportion to their income (Blaszczynski et al., 2015).
Access to cash through in-venue ATM/EFTPOS facilities and the ability to use credit for
gambling transactions constitute major risk factors contributing to increased accessibility to
funds. Whilst governments have a primary role in regulating gambling environments,
financial institutions are also key stakeholders. In Australia, the four major banks, accounting
for 73.1% of the total lending market, allow gambling transactions on credit cards for most
forms of gambling, excluding electronic gaming machines (PricewaterhouseCoopers, 2016;
Royal Commission into Misconduct in the Banking, Superannuation and Financial Services
Industry, 2018). In contrast, other financial institutions (e.g., American Express, Bank of
Queensland, Citibank, Suncorp Bank, Virgin Money, and Bendigo Bank) prohibit the use of
credit cards for gambling (Bradney-George, 2017; South Australian Financial Counsellors
Association, 2016). Most banks do not appear to have made any public comment about their
rationale for doing so. Several banks, including Bank Australia Limited (2017), are currently
reviewing their policies regarding gambling in view of the negative impacts of problem
gambling. To date, there is little evidence of banks considering similar restrictions relating to
other problematic risk-taking behaviours with potential financial harms (e.g., excessive
shopping), aside from fraudulent or illicit activity. Under the National Consumer Protection
Framework, the Australian Government has prohibited wagering operators from providing
lines of credit to consumers, as implemented in some Canadian jurisdictions (Hincer, 2016).
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Direct links from online wagering operators to payday lenders are also prohibited
(Department of Social Services, 2017). Consumer protection advocacy groups are now
calling for complementary bans on financial institutions offering credit for consumer
gambling transactions (Department of Social Services, 2016; Financial Counselling Australia
[FCA], 2017; UCA Funds Management, 2016). Such appeals have also been made in the
United Kingdom amidst a government review into gambling regulation (Etches, 2018;
PokerNewsReport.com, 2018; Responsible Gambling Strategy Board, 2018).
There is an increasing expectation for financial institutions to conduct business in a
socially responsible manner (Scholtens, 2009). This expectation is driven by a broad range of
factors, including competitive, societal, political, regulatory, media, and ethical influences
(Ali, Frynas, & Mahmood, 2017; Darus, Mad, & Nejati, 2015; Marin, Ruiz, & Rubio, 2009).
In addition to creating stable macroeconomic environments, financial institutions exert
significant influence over the stability and sustainability of the finances and livelihoods
entrusted to them by individuals (Griffiths, 2007). Financial institutions therefore operate in a
highly regulated environment and have a widely recognised responsibility for enhancing
customer wellbeing (Castelo, 2013). Consequently, financial institutions typically devote
considerable resources to corporate social responsibility (CSR) activities. The ethical
implications of CSR for corporations involved in the gambling industry have been the subject
of debate (Leung & Snell, 2017; Lindorff, Prior Jonson, & McGuire, 2012; Miller &
Michelson, 2013; Prior Jonson, Lindorff, & McGuire, 2012). Given the importance of
financial harms as an indicator of problem gambling, and banks’ responsibility to enhance
customer financial wellbeing, there is reason for financial institutions to implement effective
harm-minimisation strategies.
Insights into financial decision-making are useful for understanding consumer
gambling behaviour, given similarities in other decision-making processes (Hurla, Kim,
Singer, & Soman, 2017). Despite extensive research exploring consumer financial decision-
making and mental accounting (Kahneman & Tversky, 1979; Thaler, 1980; Thaler &
Johnson, 1990), there is a paucity of literature applying these findings to financial
institutions’ policy and practice in response to consumer gambling behaviour. Advances in
behavioural economics offer potential avenues for developing more sophisticated theoretical
frameworks for understanding the role of financial institutions in gambling. This includes
considering institutional responsibility in reducing information asymmetries, improving
financial literacy, and establishing environments conducive to informed decision-making
(Altman, 2012).
This scoping review broadly aims to consider the role of financial institutions in
gambling and minimising related harms. We initially reviewed the broad role of financial
institutions as intermediaries in gambling-related transactions, and subsequently, four specific
aims: (i) to examine the role of financial institutions in facilitating gambling-related
transactions by provision of credit, (ii) to investigate the nature of financial institutions’
policies on gambling, (iii) to explore financial institutions’ potential role in regulation of
gambling, and (iv) to consider their responsibility for enhancing customer wellbeing. The
paper is intended to stimulate debate and focused research, and to identify potential targets
for policy and interventions. The findings have implications for policy makers, financial
institutions, consumer advocacy groups, and other relevant stakeholders, and may extend to
other problematic risk-taking behaviours involving potential financial harms for consumers.
Methodology
For the scoping review, the academic literature (Scopus, Web of Science, PsycINFO,
and the ABI/Inform Collection) was searched using the following keywords: ‘financial
institution’; bank; gambl*; policy; wellbeing; ‘financial hardship’; credit; sustainability.
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Articles relevant to the role of financial institutions in facilitating gambling, or establishing
gambling-related policies were selected from peer-reviewed journals. An environmental scan
was conducted to gain an overview of current policy and practice. The focus was limited to
financial institutions providing services directly to consumers, such as banks and credit
unions. Keywords were used in the environmental scan to search Google for non-academic
reports, newspaper articles, parliamentary submissions, and financial institution policy
documents. Using Google Advanced Search functions the websites of Australia’s four major
banks (Australia and New Zealand Banking Group Limited [ANZ], Commonwealth Bank of
Australia [CBA], National Australia Bank Limited [NAB], and Westpac Banking
Corporation [Westpac]) were searched for publicly available information. The environmental
scan was not exhaustive; documentation not publicly available, such as internal policies,
standards, or procedural documents of financial institutions were inaccessible. Searches were
conducted between November 2017 and October 2018.
Role of financial institutions as intermediaries in gambling transactions
The present-day ubiquity of electronic funds transfer means that financial institutions
are key participants in the majority of transactions. Gambling-related electronic transactions
can be identified by a financial Merchant Category Code (MCC), a standardised four-digit
classification allocated to a merchant based on their primary business type. In an online credit
card transaction, five parties are usually involved: cardholder, card issuer (e.g., bank), card
payment system (e.g., Visa, MasterCard), acquirer (e.g., bank receiving funds on behalf of
merchants), and merchant (e.g., online gambling provider) (iBus Media Limited, 2011). The
Reserve Bank of Australia (RBA; 2018) reported that, as of November 2017, there were 16.7
million credit and charge card accounts in Australia with a total outstanding balance of AUD
$52.2 billion, and total credit limit of AUD $152.6 billion. The trend from cash and cheque to
debit and credit card payments continues to grow amongst Australians. Debit and
credit/charge cards accounted for 52% of total payments in 2016 (up from 26% in 2007) from
over 1,500 participants surveyed (Doyle, Fisher, Tellez, & Yadav, 2017). Card payments for
online transactions accounted for 6% of total payments in 2016. Internationally, global non-
cash transactions grew 11.2% during 2014-15 to a total of USD $433.1 billion, with
continued increases predicted (Capgemini & BNP Paribas, 2017). Credit cards are a primary
means of payment for online gambling transactions, amongst more than 170 different
payment methods available, including a range of third-party e-wallets (e.g., Neteller and
Skrill) (Gainsbury, 2012; PokerNewsReport.com, 2018).
Financial institutions also play a role in ‘offline’ gambling transactions. Land-based
gambling transactions are not as easily identifiable as are online transactions. Consumers are
able to make offline gambling transactions via debit or credit cards, or using cash withdrawn
from in-venue ATM/EFTPOS facilities (Australian Transaction Reports and Analysis Centre,
2011; Productivity Commission, 2010a). In some instances, transactions are not clearly
identified as gambling as consumers may use funds to purchase non-gambling goods and
services within licensed gambling venues. Nonetheless, there are restrictions in several
jurisdictions (e.g., Australia, Canada, Singapore), such as requirements for ATM facilities to
be placed outside the gambling floor and restrictions on the daily number or value of
ATM/EFTPOS transactions permitted. Evidence strongly linking ATM/EFTPOS facilities
and gambling-related harms has supported recommendations for restrictions (Productivity
Commission, 2010a).
If restrictions on gambling transactions were introduced using the MCC as an
identifier, safeguards would be necessary to prevent gambling operators circumventing such
measures by altering their primary business type (Miller, 2008). Overall, however, the
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relative ease of identifying electronic gambling transactions, as opposed to cash payments,
makes such transactions a more feasible targeted intervention.
The role of financial institutions in facilitating gambling-related transactions by
provision of credit
The provision of credit cards, personal loans, and overdrafts are primary means by
which financial institutions facilitate consumer gambling-related transactions (Farnsworth &
Selvaratnam, 2018; Kratzke & Depperschmidt, 2006). In doing so, gamblers are able to fund
gambling levels beyond affordable levels. Gambling-related transactions are commonly
treated as cash advances by card issuers (ANZ, 2017b; CBA, 2017b; NAB, 2016;
Responsible Gambling Strategy Board, 2018; Westpac, 2017). A Queensland household
survey of 15,000 adults in 2008/09 found credit card use to access cash advances for
gambling to be more common amongst problem (27.1%) compared to low-risk gamblers
(6.6%) (Productivity Commission, 2010a). Use of credit appears a moderating factor in the
experience of gambling-related harms. Cash advances attract high interest rates, additional
fees, and do not include interest-free periods (Bradney-George, 2017). For example, for
credit card gambling transactions, CBA (2017a) charges a cash advance fee of AUD $2.50 or
2.00% of the transaction amount (whichever is greater), and interest accrues at a rate of
21.24% p.a. from the transaction date. Hypothetically, a customer using a credit card to place
a total of AUD $2,500 with an online wagering operator and making minimum monthly
repayments would pay a total of AUD $12,813 over 39 years (assuming the opening balance
was $0 and the only transaction made). As stated by the UK’s Responsible Gambling
Strategy Board (2018), ‘[t]he cost of gambling with a credit card is so high that it is hard to
envisage why consumers would choose to pay in that way, unless it was to gamble with
money not otherwise available to them’ (p. 3). Using credit cards to finance gambling
activities could inevitably become problematic for consumers lacking financial resources to
repay outstanding balances.
For this reason, provision of credit for gambling has been a major concern for
consumer advocacy groups. Financial Counselling Australia (FCA) (2017) has argued that
there may be ‘increased reliance on credit cards as a means of fuelling gambling addictions’
(p. 3) following the ban on Australian gambling operators offering credit to consumers. To
date, little empirical attention has been given to the true extent of credit provision for
gambling, or to the prevalence of harms associated with this practice. FCA (2017) reports
that financial counsellors frequently encounter clients acquiring multiple credit cards, often
with debt running into the tens of thousands of dollars, largely as a result of gambling. They
argue that consumer credit protection measures are inadequate. Consumers only need to
demonstrate capacity to make the 2% minimum monthly repayments, with no limit to
amounts able to be gambled in any session (subject to card limit). After conducting a survey
on the attitudes of an online sample of 1,002 Australians towards institutional lending
practices, Fear and O’Brien (2009) found 72% of respondents agreed with the statement, ‘it is
too easy for banks to lend money to people who can’t afford the repayments.’ This is
consistent with gambling industry sources suggesting that customers with multiple cards are
at greater risk of harm, indicating that this might be an appropriate target for intervention
(Labour calls, 2018).
Financial institutions have faced extensive public criticism over their lending
practices, with FCA accusing banks of ‘wilful blindness’ (Farnsworth & Selvaratnam, 2018,
para. 23). In one example cited by Farnsworth and Selvaratnam (2018), a major bank
approved a personal loan of AUD $25,000 to a customer with minimal savings and whose
transaction history revealed his expenditure of hundreds of dollars a day with online
gambling operators. Under the National Consumer Credit Protection Act 2009 (Cth),
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financial institutions have an obligation to assess the unsuitability of a credit contract given a
consumer’s financial circumstances and to prevent them from entering into an unsuitable
contract. The Australian Prudential Regulation Authority, which oversees the industry, has
suggested that whilst strong responsible lending policies may be in place, actual compliance
may be lacking in practice (Byres, 2017).
Some banks have introduced measures restricting the use of credit products for
gambling in an effort to promote responsible gambling. CBA (2003) does not permit credit
card cash advance transactions on in-venue ATMs to limit cash availability. More recently,
the four major banks have suggested they will be introducing further measures to protect
customers in financial hardship, including options for customers to block credit card use for
online transactions (Farnsworth & Selvaratnam, 2018). CBA’s former Chief Executive
Officer, Ian Narev (2017), indicated that the bank is considering whether to cease permitting
credit card use for online gambling transactions. Brian Hartzer (2017), Westpac’s Chief
Executive Officer, reported that whilst the bank does not have a specific policy regarding
credit provision for online gambling, ‘what I can certainly assure you of is: we are not
supporters of the idea of customers using credit cards to gamble’ (p. 18). Credit card scheme
regulations were cited as a complicating factor in advancing this issue.
Despite this, numerous gambling industry stakeholders have argued that proposed
consumer protection measures are insufficient. They advocate that at the core of the problem,
there is ‘a clear difference between allowing a person to use money from their cheque or
savings accounts to gamble as they see fit, and allowing a person to gamble on credit, where
losses can be much higher’ (Clubs Australia, 2009, as cited in Productivity Commission,
2010, p. 580). This statement summarises an emerging issue for financial institutions in
relation to responsible lending. Regulations already restrict use of credit in Australian land-
based gambling venues, but credit cards remain a primary payment method for online
gambling. Evidence suggests that moderate risk and problem gamblers use credit to fund
gambling activity more frequently than other gamblers (Productivity Commission, 2010a).
This creates tension between banks’ lending decisions and their social responsibilities to
consumers.
Financial institutions’ policies on gambling
The environmental scan revealed that very few financial institutions appear to have
detailed gambling-specific policies or position statements. Many banks set out their
overarching positions relating to CSR in sustainability statements; however, only a small
number make reference to gambling.
Of the four major Australian banks, none have position statements specific to
gambling (ANZ, 2015; CBA, 2018b; NAB, 2017a; Westpac, n.d.-a). In their most recent
sustainability reports, however, gambling was identified by NAB as both an area of
engagement with consumer advocacy organisations and an issue of interest for shareholders,
particularly with regard to ‘provision of credit cards for use in gambling transactions’, and
‘exposure to companies with a negative social impact (i.e., gambling, fossil fuels, tobacco)’
(NAB, 2017b, p. 79). ‘Gambling addiction’ (NAB, 2017b, p. 18) was also identified as a
personal issue for some financially vulnerable customers. ANZ (2017a) reported piloting a
hardship assistance program for customers with gambling-associated debt. No reference was
made to gambling by CBA (2017c) or Westpac (2017). Internationally, Standard Chartered
(n.d.) was one of few major financial institutions having a gambling-specific position
statement. The bank’s stated concern is the associations of gambling with ‘fostering organised
crime, prostitution, facilitating money laundering, and problem gambling and personal
bankruptcy’ (p. 2). Overall, the statement’s content predominantly concerns the bank’s
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activities in corporate finance, setting out lending criteria for gambling sector clients, rather
than detailing policy regarding consumers experiencing gambling-related financial hardship.
Gambling is recognised by several smaller Australian banks as an issue relevant to
their sustainability framework. Many of these corporations, however, similarly appear to lack
a comprehensive consumer-focused gambling-specific position statement. Bank Australia
Limited (2017) has invited customers to participate in an online survey to give their opinions
on credit provision for consumer gambling transactions. Along with other industries seen to
have adverse social impacts, the gambling industry is identified in the responsible investment
strategy of many banks as one with which they avoid involvement (Bank of Queensland
Limited, n.d.-a; Bendigo and Adelaide Bank Limited, 2016). A number, including NAB,
Westpac, Bank of Queensland, Bank of Melbourne, and St. George Bank, state that they will
not sponsor activities relating to gambling (Bank of Melbourne, n.d.; Bank of Queensland
Limited, n.d.-b; NAB, n.d.; St. George Bank, n.d.; Westpac, n.d.-b).
As an advocate for the banking industry, the Australian Bankers’ Association (ABA)
stated support for ‘encouraging socially responsible programs and effective and workable
strategies for addressing problem gambling’ (Münchenberg, 2011, p. 1). The ABA’s Policy
Director stated that ‘the ABA and member banks believes gambling has serious detrimental
consequences, not only for those who experience financial and emotional deterioration
through a gambling addiction, but also on society in general’ (Hossack, 2012, p. 1). In this
letter, the ABA summarised measures employed by the four major banks to assist customers
experiencing gambling-related financial hardship. The measures surveyed included whether
the bank had a financial literacy program, a financial hardship policy, restrictions on in-venue
credit card cash withdrawals, and whether customers can adjust maximum credit limits.
However, only yes/no answers were made to each item, with no detailed evaluation provided
about the appropriateness of existing measures. Based on this superficial survey, the ABA
concluded that ‘banks have consistent measures which would be useful in assisting those
people and families battling gambling addiction’ (Hossack, 2012, p. 1).
Overall, gambling does appear to be at least somewhat a consideration for policy
makers within the banking industry. However, it seems that their focus is more on risk
mitigation for corporate lending and reputation, rather than on customers. The latter issue
looks to be attracting more attention from banks, especially with trends towards a stricter
regulatory environment and following increasing calls from advocacy groups to ban credit
provision for gambling transactions.
The role of financial institutions in regulation of gambling
In Australia, the Interactive Gambling Act 2001 (Cth) (IGA) stipulates that the
Government may establish regulations providing that an agreement allowing for the exchange
of a monetary payment for the supply of an illegal online gambling service will have no
effect to that extent. This provision could implicate financial institutions in regulating online
gambling transactions, but such regulations have not been introduced to date (OECD, 2011).
A review of the IGA by the Department of Communications, Information Technology and
the Arts (2004, cited in The Allen Consulting Group, 2009) suggested that doing so could
expose Australian card-issuing financial institutions to litigation over dishonoured gambling-
related debts (e.g., repudiation of gambling debts incurred by consumers). The review
suggested that this could potentially result in financial institutions deciding to block all
gambling-related transactions. In Germany, financial institutions have been implicated in the
identification and blocking of illegal online gambling transactions following a recent court
ruling in favour of customers not having to repay credit card debts accumulated with
unlicensed operators, dependant on the bank’s awareness of the nature of the transaction
(Conneller, 2018).
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A subsequent review of the IGA by the Department of Broadband, Communications,
and the Digital Economy (DBCDE; 2012) concluded that blocking of illegal gambling
transactions may be possible if the Government maintained a register of unlicensed online
gambling operators. However, this approach has not been pursued thus far (Australian
Communications and Media Authority, 2018). Hampering its feasibility are concerns relating
to the cost and complexity of implementation within payment systems, and the relative ease
of circumvention (e.g., by using overseas-based payment methods). The ABA has voiced
these concerns, suggesting that ‘new systems and processes for all electronic transactions
would be operationally complicated, administratively costly, and legally convoluted’
(Münchenberg, 2011, p. 4; Tate, 2016).
International attempts to regulate illegal online gambling using financial transaction
blocking demonstrate the existence of such obstacles. In the United States, the Unlawful
Internet Gambling Enforcement Act of 2006 (UIGEA) targets financial institutions as a
means for regulation. The Act prohibits financial institutions from accepting payments for
unlawful online gambling transactions (OECD, 2011). However, the legal implications for
financial institutions are unclear, given that an explicit definition of what constitutes illegal
activity is lacking (Fidelie, 2009; Marconi & McQuaid, 2007). The ease of circumventing
transaction-blocking mechanisms is a major criticism of this approach (DBCDE, 2012). For
example, third-party payment providers and cryptocurrencies are widely accepted by many
offshore gambling sites (Gainsbury & Blaszczynski, 2017). Third-party providers may
operate as intermediaries to disguise gambling-related credit card transactions (Fidelie, 2009;
Leonard, 2008; U.S. Department of Justice, 2007). Prohibition approaches appear to create an
impetus for consumers to move away from larger legitimate gambling providers to smaller
unregulated offshore operators (The Allen Consulting Group, 2009). Fidelie’s (2009) review
of Internet gambling regulation strategies concluded that aiming to regulate online gambling
solely through financial institutions is not a comprehensive strategy.
The responsibility of financial institutions in enhancing customer wellbeing
The role financial institutions play in customers’ financial wellbeing has implications
for customers’ wellbeing more broadly. Indebtedness, for example, has been linked to poor
mental health outcomes (Drentea & Reynolds, 2012; Fitch, Chaplin, Trend, & Collard, 2007).
Shah, Mullainathan, and Shafir (2012) provided evidence that having little (financially) can
lead to attentional biases which manifest in behaviours such as over-borrowing. The role of
financial sectors in consumer mental health and wellbeing has received limited academic
inquiry. However, these concepts have emerged as key community concerns.
Consequentially, many financial institutions engage in marketing based around commitments
to enhancing customer wellbeing. ANZ (2017a) states, ‘our purpose is to shape a world
where people and communities thrive’ (p. ii). The bank also acknowledges the importance of
financial wellbeing in the broader context, stating ‘it is widely accepted that financial
wellbeing contributes significantly to overall health and wellbeing and community
connectedness, leading to greater economic and social participation’ (p. 46). Despite such
commitments, a 2013 US Gallup web survey of over 11,800 adults found that only 25% of
customers strongly agree with the statement, ‘My bank looks out for my financial well-being’
(Riffkin & Jalajel, 2015).
Currently, financial institutions primarily seek to enhance customer wellbeing by
providing financial hardship assistance. Institutions typically define financial hardship as a
period of difficulty where customers are unable to meet current financial obligations (e.g.,
mortgage or credit card repayments), despite intentions to do so (ABA, 2016). Period of
financial hardship may be short-term, involving a temporary measure to assist customers
(e.g., payment deferral, or late/default fee waiver), or sustained, requiring formal assistance
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(e.g., agreeing on a new repayment plan, loan refinancing, or bankruptcy arrangements).
Banks generally offer customers financial literacy information and tools for budgeting and
expenditure tracking, and referrals to free financial counselling services (CBA, 2018c). The
number of customers provided with hardship assistance during 2017, reported by each of
Australia’s four major banks, ranged from 19,652 to over 72,000 (ANZ, 2017a; CBA, 2017c;
NAB, 2017b; Westpac, 2017). The ABA (2016) sets industry guidelines for hardship
assistance to provide a framework for consistent decision-making; however, each bank has its
own policies and procedures. This means that the solutions offered differ depending on the
financial institution and personal circumstances.
Although many banks invest substantial resources in hardship assistance programs,
few list gambling as a risk factor in their policies. This is despite well-documented financial
harms associated with problem gambling. Financial institutions typically describe
circumstances or events precipitating hardship as ‘unforeseen’ or ‘unexpected’ (ABA, 2016).
Commonly cited examples include job loss, relationship breakdown, illness, or natural
disaster. Based on most banks’ financial hardship policy documents, it is not clear how banks
would respond to requests for assistance from customers reporting gambling-related hardship.
Despite that, some banks provide links to problem gambling support services on their
websites. For customers seeking to proactively manage their gambling activity, banks
generally offer the ability to block international transactions, contactless card payments, and
ATM cash advances on credit cards, as well as options to set transaction and overall
expenditure limits (e.g., CBA, 2018a). Some Australian financial institutions (e.g., ANZ,
2002; Westpac, n.d.-c) offer credit cardholders the option to block gambling transactions
registered under the MCC ‘Betting/Casino Gambling’. In June 2018, Starling Bank Limited
announced that they were “the first UK bank” (para. 7) to enable customers to block card-
based gambling-related transactions. This option is now also offered by Barclays Bank UK
PLC (n.d.) and Monzo Bank Limited (2018). Within the first four months of Monzo Bank
making the option available, more than 25,000 customers were reported to opt-in, of which
about 8,000 reported a history of gambling (Whitworth & Beazley, 2018). Monzo Bank has
reported a 70% reduction in the gambling transactions of these customers (Whitworth &
Beazley, 2018).
Discussion
The behavioural economics perspective
What should the role of financial institutions be in gambling? Who is primarily responsible
for consumer gambling debt: lenders, regulators, or the consumers themselves? Issues such as
these remain contentious, particularly in the public discourse between banks and consumer
protection advocates. Financial institutions currently appear to take an individual-focused
approach to consumer gambling behaviour. Fear and O’Brien (2009) suggest that financial
institutions are typically of the view that ‘individuals must shoulder the consequences of their
own choices’ (p. 4). Most banks rely upon the individual customer to request financial
hardship assistance, rather than proactively identifying financially vulnerable customers and
offering assistance (CBA, n.d.). This approach, which relies on individuals taking action
themselves to resolve their problems, tends to align with the ‘addiction’ model of gambling.
This model conceptualises problem gambling similarly to substance abuse disorders.
Behavioural economics presents an alternative by framing gambling behaviour as a public
health issue. This alternative provides a theoretical basis for government and institutions to
develop policy at the population level with potentially preventative effects.
Altman (2012) has argued for the value of behavioural economics over conventional
economic theory for public policy relating to financial literacy. Financial literacy involves
possessing the competencies required to make responsible financial decisions (Altman,
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2012). This subject has received very little direct attention within the context of gambling.
Altman (2012) draws upon the work of Kahneman and Tversky (1984) and Simon (1978) to
demonstrate the limitations of conventional economic wisdom in assuming human rationality
in decision-making. Assuming the individual’s capacity for optimal decision-making, the
conventional approach sees little theoretical basis for government or institutional
interventions. However, this approach lacks consistency with real-world human decision-
making. In reality, humans often have incomplete or poor information to work with and make
decisions with less rationality than ascribed by conventional theory. The behavioural
economics model posits that humans are systematically biased or error-prone in their
decision-making as a result of heuristics, or cognitive decision-making short-cuts. To
compensate for these biases, which can lead to sub-optimal decisions, behavioural economics
proposes a greater role for government and institutions in creating environments that nudge
individuals towards better decisions (Thaler & Sunstein, 2008). Altman argues that policy
interventions are critical for reducing the information asymmetries that often exist with
financial products. Credit card interest rate policies, for instance, should be written in plain
language easily understood and used by consumers to make informed decisions.
There is a need for further discourse around the application of this same logic to
financial institutions’ policies regarding consumer gambling behaviour. For example,
customers are currently offered the option of reducing ATM withdrawal limits, but banks
require an explicit instruction from the customer to do so (Productivity Commission, 2010a).
A survey of approximately 200 problem gamblers by the Productivity Commission (2010b)
found that 86% of respondents had never contacted their financial institution to lower their
ATM withdrawal limit. Only 18% nearly always or often left their ATM or credit cards at
home as a self-control strategy. This suggests that the current reactive approach, relying on
customers with gambling problems to manage their expenditure and request financial
hardship assistance, may be largely ineffective in promoting customer wellbeing.
Furthermore, the ABA’s (2016) guidelines on financial hardship state that customers are
usually already in arrears when banks become aware of their financial hardship, yet they also
acknowledge that customers may be reluctant to seek assistance from banks. This reluctance
may be driven by factors such as embarrassment, guilt, shame, fear, denial, or concern that
the disclosure would affect credit ratings. The tension between banks’ practices relating to
initiation of financial hardship assistance and the reality of customers’ personal
circumstances appears to thwart customers’ ability to access support. Banks may be
neglecting their ability to initiate contact with customers identified as experiencing financial
hardship under clause 28.4 of the Code of Banking Practice (2013). The ABA guidelines
state that ‘ultimately, customers are best placed to know whether they are struggling
financially’ (p. 14). However, given the complexity and information asymmetry that
characterise many financial products, behavioural economics would suggest it is not so
simple. Hurla et al. (2017) have provided a thorough review of findings from financial
literacy programs to draw implications for strategic interventions promoting responsible
gambling. Interventions are recommended to target three key behaviours associated with
responsible gambling: setting limits, tracking behaviour, and impulse control. Setting and
adhering to limits is a common method of self-regulation amongst gamblers. As gambling
involves distributed choice, tracking a series of decisions to gamble over time and making the
aggregate expenditure salient to the customer can help them evaluate the extent of their
spending. Targeting problem gamblers’ impulses to repeatedly choose immediate rewards
despite their combined sub-optimal value over time is also fundamental to promoting
responsible gambling choices. Key to these three strategies is their timing, which rests
theoretically on the importance of context in framing a choice between various options, such
11
as whether to continue gambling or to pursue a different activity (Tversky & Kahneman,
1981). Smartphone apps are a promising avenue for financial institutions to integrate
responsible gambling intervention strategies that assist customers in making more prudent
decisions. Tools such as CBA’s Spend Tracker utilise customer behavioural data to provide
real-time personalised feedback to engage customers in better managing their finances (Hurla
et al., 2017). Customers could be prompted to set a limit, as well as receive real-time alerts
and track overall expenditure tied to gambling-related transactions. A randomised controlled
experiment by Stewart and Wohl (2013) demonstrated the effectiveness of pop-up reminders
in facilitating adherence to monetary limits pre-set by slot machine players. Ninety percent of
participants receiving reminders stayed within their limit, contrasted to only 43% of
participants not receiving the reminders. Hurla et al. suggest sending gamblers notifications
centred around tangible items of equivalent value to their gambling losses could aid
visualisation of alternatives to gambling (e.g., “You just lost the equivalent of buying a new
laptop”). Whilst a financial institution’s app could not feasibly report a gambler’s losses,
notifications could focus on gambling expenditure in relation to pre-set limits. Hurla et al.
suggest that social influences could also be used to drive responsible gambling behaviour.
Customers with joint bank accounts could be given the option for their partner to receive
alerts triggered by in-venue ATM withdrawals and gambling-related transactions could be
made more apparent on credit card statements. Real-time app-based strategies overcome
concerns around the ineffectiveness of financial literacy education programs due to memory
decay. However, Shefrin and Nicols’ (2014) finding that 25% of credit cardholders report
low confidence in managing their finances using online technologies indicates that apps may
not be used by all consumers. Nonetheless, this strategy presents an opportunity to nudge
customers engaging in gambling activity towards responsible gambling behaviour. Doing so
is in the interests of financial institutions, acting as a preventive measure against customers
falling into financial difficulty, and is part of their corporate responsibility.
Another key opportunity for change is financial institutions’ policy on credit
provision for gambling-related transactions. From a behavioural economics standpoint,
permitting problem gamblers to use credit to fund gambling transactions is risky. Gambling
decisions are intertemporal in nature, as are credit card transactions (Chan, Soman, &
Cheema, 2011; Loewenstein & Thaler, 1989). The financial consequences of a consumer’s
choice to enjoy the immediate gratification of a gamble are delayed in time from their
original decision. As humans are typically myopic in their preferences, it is not surprising
that problem gamblers commonly have credit card debt running into the tens of thousands of
dollars (FCA, 2017; Hurla et al., 2017). Ali, McRae, and Ramsay (2012) suggest that
consumers, especially those vulnerable to financial hardship, may exhibit behavioural biases
in relation to optimism and imperfect self-control resulting in underestimations of their
capacity to meet repayment obligations. Provision of targeted consumer-specific information
over existing disclosure-based regulation is suggested to assist vulnerable customers in
making prudent financial decisions.
Financial institutions should also have policies to guide responses to customers self-
disclosing gambling problems. This would involve creating action plans for customer-facing
staff (e.g., telephone support staff, branch staff) to identify specific trigger words and respond
appropriately. Responses may include referral to specially-trained financial assistance staff
and gambling treatment and support services. Disclosures should be communicated
throughout the various bank departments, for example, to ensure that the customer does not
receive marketing communications offering credit limit increases. Policies should be
established for addressing disclosures made by concerned family members. Appropriate
12
training regarding gambling and related harms for customer-facing bank staff and
management would assist in developing a culture that is responsive to gambling harms.
Finally, financial institutions may follow the lead of some wagering operators by
developing algorithms to detect potentially risky gambling transactions. Casinos Austria AG
(2016), for example, uses a behavioural tracking tool to monitor indicators of risky gambling
activity, such as the frequency and amount of monetary transactions. If particular risk
thresholds are met, the operator obtains a credit report for the customer, who is invited to
meet with specially-trained casino staff to review their gambling activity. Development of
machine learning approaches may involve working with gambling researchers to identify
specific behavioural indicators, such as repeated and increasing transactions with gambling
operators, accessing credit on multiple occasions, instances of failing to make appropriate
repayments or repeatedly making the minimum repayment, and fees from other merchants
indicating failure to pay bills. Evaluation would be needed to verify the accuracy of any
algorithm and detection systems. Policies would need to be developed to guide action when
suspected risky gambling is detected, which would likely involve contacting the customer.
Initial work completed by the gambling industry may be helpful to guide these developments.
Limitations and future directions
As it was not possible to review banks’ internal policies and practices relating to consumer
gambling activity, this paper is limited in its scope for evaluating the status quo within the
industry. This review provides an overall picture of the discourse to date within both the
academic and public domains. The findings have implications for policy makers within
government and institutional settings. In-depth case studies would be valuable in providing
insight into the interpretation and implementation of CSR strategies relating to consumer
gambling activity within specific financial institutions. Qualitative methodologies, such as
interviews and focus groups, could be useful to gain a better understanding of the underlying
issues concerning both financial institutions and consumers. For example, it would be useful
to understand specific barriers to customers disclosing gambling-related problems to financial
institutions, as well as the confidence of bank staff in handling such disclosures. The
prevalence of consumers who fall into debt as a result of using credit to fund their gambling
activity requires further investigation, including credit provided by financial institutions,
gambling operators, and payday lenders. Future research should focus on developing
effective interventions that assist financially vulnerable customers in making better decisions
related to gambling for their long-term interests, whilst not obstructing the freedoms of those
who use credit and gamble responsibly. The use of customer behavioural data for such
interventions is a promising avenue warranting in-depth investigation.
Conclusions
Financial institutions play a fundamental role in consumer gambling activity, whether
through providing access to cash for offline gambling transactions, or via electronic funds
transfer for online gambling. This presents an opportunity for financial institutions to
implement harm-minimisation strategies, complementing interventions provided by industry
and regulators. Currently, most financial institutions appear to lack policies on gambling,
including strategies to identify and assist financially vulnerable consumers with gambling
problems. Financial institutions appear to be largely of the view that they have little business
in how customers spend their money (excluding fraud and other illicit activity), regardless of
whether customers are spending their own savings or using credit. This view seems to align
with public expectations and banks’ regulatory obligations, especially in relation to consumer
privacy standards. From a public health standpoint, however, banks do have a certain level of
responsibility for how customers use their money. Financial institutions are able to
13
compensate for bias in decision-making, which is fundamental to problem gambling
behaviour. A measured approach is needed that enables customers to engage in gambling at
an appropriate level, whilst providing those experiencing gambling-related harms with
options that do not rely solely on self-enactment by such customers.
14
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