Loyalty is a three-way street: rethinking VIP programs in light of new regulations

Rewarding players for their spend in your online casino is crucial, and loyalty programs aim to do just that. However, legislators have been taking issue with the handling of high value customers by operators, leading to a new wave of regulations greatly impacting retention efforts. Keep reading to get up to speed.

Player retention is a make-or-break challenge for online casinos. Operators, developers, and affiliates all focus on developing different methods of retaining players. Player retention strategies are especially important in light of how crowded the market is - for dissatisfied players, there’s always another option.

In light of the field’s heavy competition, it’s very common for online casinos to offer loyalty programs, often in the form of a VIP program. With these programs, players earn points by making deposits, participating in tournaments, and performing other actions the casino views as valuable. Players can move up through the tiers of a VIP program, earning improved benefits at each level.

However, the handling of VIP programs — and VIPs themselves — has become a point of contention between operators and legislators, and in the past few years we’ve witnessed a tightening of relevant regulations in various jurisdictions. With the regulatory landscape quickly changing, it may be time to come up with new solutions to reward players’ loyalty.

Different points of view

The case for VIP programs is strong. It’s common in many industries, after all, to offer higher levels of service and better products for customers who can afford them. Airlines, for example, don’t limit themselves to economy class, but also offer business and first classes, with increasing levels of comfort and luxury. They also offer membership cards and loyalty programs where frequent fliers accumulate miles and earn rewards.

The same goes for casinos — both online and not. Loyalty and VIP programs offer a mix of tangible and intangible rewards, introducing an element of gamification. Players can earn deposit bonuses and free spins as well as the psychological satisfaction of reaching higher levels and earning points, badges, and bragging rights.

High rollers who make sizable deposits and visit the casino often are valuable players, so online casinos reward them accordingly, by offering benefits that go from deposit bonuses and free spins to substantial perks — think preferential service like dedicated account managers available 24/7 and higher banking limits, or access to exclusive tournaments with sizable prizes on the line. Many online casinos derive a significant amount of their revenues from high rollers, and consider retaining them a high priority.

However, not everyone views the issue the same way. Due to their high levels of spend and playing frequency, VIPs are widely considered to be at a greater risk of harm compared to the average player. That’s why in some jurisdictions legislators are keen to tightly regulate online casinos’ loyalty programs in an effort to tackle problem gambling.

On top of this, the volume of money changing hands represents a massive risk from a money laundering perspective, further adding to regulators’ worries.

Operator’s measures

Online casinos generally have a single set of procedures for dealing with problem gambling, so that all players receive equal treatment. While there are no special protections or regulations for VIPs who exhibit signs of problem gambling, many online casinos employ a special customer support division — the same account managers that provide round-the-clock service to VIPs, are tasked with developing personal relationships with the platform’s high rollers. This allows the platform to better evaluate the player’s condition and keep an eye out for warning signs. 

If VIPs do exhibit signs of problem gambling, VIP managers try and steer them towards self-control or even self-exclusion measures. If a VIP continues to exhibit problem gambling behavior despite warnings and advice from the VIP manager, the issue could be escalated through the casino’s responsible gambling team and the player might be given a break or even have their account canceled.

The same is true for anti-money laundering procedures (AML). Operators usually run the required checks once certain transaction thresholds are reached — like requesting proof of origin of the funds deposited by players — without necessarily going the extra mile when high-value customers are involved.

Many casinos implement this familiar, hands-on approach to problem gambling and AML. However, in the eyes of some regulators, it is not sufficient. 

Regulations and reactions

Several highly regulated countries have recently introduced legislation aimed specifically at online casino loyalty programs.

In September 2020, the United Kingdom Gambling Commission introduced new license conditions to tackle irresponsible VIP-related practices, just six months after a landmark case involving online betting giant Betway. The operator was fined a record £11.6 million for both failing to run comprehensive AML checks in the face of evident risk, and to show social responsibility in interacting with customers that had shown problematic behavior and suffered unsustainable losses.

The new regulations mark a move from “trigger thresholds” to “continuous evaluation”, and require operators to maintain up to date evidence of players’ identity, occupation, and source of funds, continuously verifying the information provided and regularly conducting gambling harm checks and making sure that the players’ spending remains affordable and sustainable.

In January 2019, Swedish authorities introduced legislation that limits bonuses to a maximum of SEK100 (€9.7/$11 as of December 2021), greatly inhibiting operators’ abilities to offer VIP and loyalty programs.In the same month, Danish authorities introduced limits on bonuses in order to curb problem gambling. Bonuses are now limited to DKK1,000 (€134.4/$151.8).

To remain compliant with regulations while giving players incentives, operators had to get creative. For example, MariaCasino (part of Kindred Group) enacted a policy of giving players 10% cashback on their weekly losses. The casino views the move as a test of a simpler and more transparent strategy for customer rewards.

Steps operators can take

In some operators’ eyes, the best way forward is to demonstrate to regulators that casinos can effectively and responsibly handle VIP accounts. There are a few different measures that operators can take. 

With a player safety early detection system, operators can use an algorithm to track player behavior. Operators can keep an eye on players’ levels of spending, paying careful attention to amount- and frequency-based indicators. Significant jumps in the amount or frequency of deposits can be an indication of potential problem gambling behavior. However, behavior indicators can be even more effective. Actions like chasing losses, canceling withdrawals, playing at night, and attempting to use invalid credit cards can indicate that a player is developing a gambling problem. As for AML concerns, continuous evaluation of funds availability seems to be the most effective preemptive tool.

MariaCasino, mentioned above, provides a good example of how operators can cooperate with regulators in a way that doesn’t harm their business or deprive players of a valuable benefit. The program works in compliance with updated regulations while still incentivizing players to stay on the platform. This kind of creative solution could provide the way forward in jurisdictions where regulators target VIP programs and other casino loyalty programs and bonuses. 

Some operators are planning on shifting their promotional strategies toward encouraging sustainable gambling habits instead of focusing on high-risk high-rollers.

Operators can also take steps to prevent increasing regulations by proactively engaging with legislators. Increased collaboration between operators could help build a database of problem and self-excluded gamblers in countries where national registers aren’t available. This would allow a feasible method of preventing self-excluded gamblers from simply switching platforms. 

Also, operators should consider implementing wagering requirements and playthrough regulations on the bonuses they offer VIPs and high rollers in order to minimize the casino’s losses. For example, if a player hits a jackpot or wins big in blackjack when playing with a deposit bonus or a free chip, there should be wagering requirements or minimum/maximum cashout restrictions on the bonus to decrease the casino’s risk of running into losses. The restrictions on the bonuses should be clearly spelled out in the promotion’s Terms and Conditions, and customer support agents should be educated on how to resolve issues tactfully. 

All in all, while some lawmakers are moving to regulate VIP programs, increased cooperation between regulators and operators and redesigned loyalty programs will enable operators to responsibly use the promotional strategy.

How can Slotegrator help?

Here at Slotegrator, we have developed a state-of-the-art online casino platform — our flagship offer. The platform comes with a dedicated bonus module that allows you to successfully retain players by creating gamified promotions and fully customizable loyalty programs. For a demo of the platform capabilities, schedule a meeting with our sales staff.