Why does trust matter in the gambling industry?
Gambles are games of luck and if consumers perceive that there is a possibility that the odds are not fair, because they do not trust the service provider, they will choose to spend their gambling dollars on other leisure activities instead. This may be a positive outcome if we consider gambling as a societal problem and an addictive behaviour with potentially harmful effects on gamblers and their families. But for social gamblers whose gambling has no negative impacts this represents a lost entertainment opportunity.
The first principles of economics tells us that when trust is present, transactions costs are lower as there is less need for search activities. You can go to any gambling venue and be sure the outcome of the bet you placed is fair. Fair in the sense that you are just as likely to win as any other punter. Consumer trust in institutions and companies is known to be reflective of their performance and reputation and is important from a corporate brand perspective. When the brand is damaged then trust falls. In the betting and gaming sector, if consumers do not trust the institutions that operate the games then they are less likely to gamble.
In Australia where gambling per capita is the highest in the world, a fall in consumption may be a positive outcome in relation to gambling related harms. Although, it is most likely that any fall in consumption would come from social gamblers not problem gamblers. The societal costs of gambling for social players are much smaller than those of problem gamblers.
Viewing the issue more broadly a fall in participation also represents lost revenue and for State Governments that rely heavily of gambling taxes, this can have significant implications. Gambling activities can be taxed at high rates as it is seen as acceptable for governments to discourage gambling expenditure through high taxes. Gambling is also a price inelastic good relative to other products due to its addictive nature making it a prefect product for high taxation.
So how do we ensure integrity of operators to ensure they are trusted by patrons?
The traditional answer has been through legislation and regulation but as the current headlines demonstrate fintech adds additional layers of complexity in ensuring that gambling operators abide by legislation and actively seek out those wanting to use casinos to money launder or other illegal activities. As financial systems get more sophisticated, detection becomes more complicated for both the casino operators and the regulators. Consumer trust may therefore be an important counterbalance. Casino operators have an incentive to self-regulate if they believe they are losing the trust of consumers. Of course, this counterbalance is only effective if the revenues from any fall in consumption due to lost trust are greater than the gains in revenue from allowing/ignoring illegal activities. In the large fintech facilitated global economy this may no longer be the case. The role of trust as a self-regulator in betting and gaming markets may be less powerful with fintech enabled global money markets than has previously been the case. If this is true then we need to ask, will the record fines alone be sufficient to deter operators from allowing/ignoring these activities? The answer to this question remains to be seen.
Professor Lisa Farrell,
Director Societal Economics Research Group
College of Business and Law, RMIT University.