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The Economist explains
The Economist explains
BYADAMGAFFIN Boston A relatively large number of information systems shops still test new. About one-third of the 250 firms surveyed said their employees have. Have begun building complex client/ server applications and betting the business. Continued from page 35 set up self-help desks, which let customers use.
by M.F.
888, an online betting firm, was fined a record £7.8m ($10.3m) in August after more than 7,000 customers who had chosen to ban themselves from their betting accounts were allowed to retain access. Yet away from the regulator’s gaze, bookies often stand accused of the opposite excess: being too prompt to shun winning customers. Successful bettors complain that their accounts get closed down for what are sometimes described as business decisions. Others say their wagers get capped overnight to minuscule amounts. The move may be unpopular with punters, but in most parts of the world it is legal.
Operators say scrutinising winners is necessary to help prevent fraud. Competition in the gambling industry increased with the arrival of online betting, prompting bookmakers to offer odds on markets they did not previously cover. In some, such as Eastern European football leagues, low wages and late payments make fertile ground for match-fixing. A winning streak at the windows can signal foul play. Most often, however, efforts to spot savvy customers are not rooted in a desire to thwart dodgy schemes. Rather, they are part of what industry insiders call “risk management”: to remain profitable, bookies seek to cap potential losses. As one betting consultant puts it, “Bookmakers close unprofitable accounts, just as insurance companies will not cover houses that are prone to flooding.” Betting outlets get to know their customers by gleaning information online, tracking web habits and checking whether punters visit odds-comparison sites. Profiling has also been made easier by the tightening of anti-money laundering regulations, which require online punters to provide detailed information when opening accounts.
Bookmakers argue that such screening is needed to restrict their involvement with professional gamblers. That in turn allows them to offer better odds to ordinary punters. Critics retort that the net is being cast too widely. Bookies may spend considerable resources trying to spot those who bet for a living, many of whom hire quantitative analysts to estimate outcomes and develop hedging strategies (in some cases seeking to exploit discrepancies between odds offered by several bookmakers to make a guaranteed profit). Online bookmakers respond with sophisticated algorithms that flag customers betting odd amounts of money—£13.04, say—on the basis that ordinary punters usually wager round sums. They take a closer look at those who snub free bets or bonuses, which rarely fit professional bettors’ models and come with terms and conditions attached. They scrutinise user behaviour. While casual punters are more likely to bet minutes before an event begins, pros will often seek the best odds by laying their wager days in advance (because the longer one waits to bet, the more information becomes available about a particular event, and thus the easier it is for bookmakers to price it). And they look at customers’ tendencies to win, sometimes accepting bets at a loss if a punter, seemingly acting on inside knowledge, allows them to gain market intelligence.
This explains why professional gamblers rarely do business with high-street bookmakers. They often place their trades on betting exchanges like Betfair or Smarkets, which do not restrict winning customers (though Betfair charges a premium to some of its most successful users). Alternatively they work with those bookmakers who use successful gamblers to improve the efficiency of their betting markets, and make most of their money on commission. These profess not to limit winning accounts and accept much bigger bets (Pinnacle, an influential bookie, often has a $1m limit for major events). Betting professionals also sneak in big trades via brokers, like Gambit Research, a British operation that uses technology to place multiple smaller bets with a range of bookmakers. Asian agents, in particular, have made their names in that trade: many are able to channel sizeable bets to local bookies anonymously. Unlike the sports they love, the games played by professional gamblers and bookmakers are kept out of the spotlight.
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