iGaming Business - Asian Gaming Focus 2018

Susan O’Leary says the continent offers remote gambling operators and suppliers enormous potential, but a considered approach is essential for entering a market that is still finding its feet.

The Asian Opportunity

Susan O’Leary says the continent offers remote gambling operators and suppliers enormous potential, but a considered approach is essential for entering a market that is still finding its feet.

Asia has long been considered a potential goldmine for online gambling operators and suppliers. It is a vast region in which consumers have an appetite for gambling and technology. At present, however, the market is covered in swathes of grey, and while some operators and suppliers have thrown caution to the wind and entered regardless, others are taking a more considered approach.

The decision to enter a new market should never be taken lightly, and it is important that businesses do their homework. Asia is complex: it is a patchwork of markets, each with different rules, requirementsand expectations. Businesses must understand these subtleties and quirks, and ensure full compliance in each if they are to establish themselves in the region for the long term.

Some markets will offer huge rewards, but entry carries significant risk.

To help with this, it is worth looking at the current state of play. Asia is advanced when it comes to gambling. The activity is legal in countries across the continent, with consumers accessing slots, table games, sports betting, lottery, bingo and pachinko. Land-based is the most established and common channel through which consumers wager, but some jurisdictions permit online and mobile play as well.

The size of Asia, the popularity of gambling products among consumers, and lawmakers’ interest in licensing and regulation combine to present a very attractive opportunity for operators and suppliers. They must proceed with caution, however – the market is still finding its feet when it comes to remote businesses and there are plenty of pitfalls for those looking to get in on the action.

This is true in particular for online gambling operators and suppliers; while offering the most potential, it is undoubtedly the most difficult sector to navigate. Although it is generally illegal across Asia, it is permitted in some countries, usually via state-run lotteries and sportsbooks. The activity is also legal in the Philippines, but operators and suppliers there will find a turbulent market in which they should expect the unexpected.

Philippines potential

Online gambling licences are available to overseas operators and suppliers in the Philippines. They are distributed by the incumbent regulator, the Philippine Amusement and Gaming Corporation (PAGCOR), via its Philippine Offshore Gaming Operator (POGO) licence. The regulator has limited the number of licences to 50 for the time being to prevent oversupply, but says the cap could be lifted at any time.

PAGCOR is in the unusual position of being both regulator and operator – it runs 17 casinos across the country – but that situation is set to change this year after the government confirmed it would be selling the properties to businesses and operators in the private sector. This should allow PAGCOR to focus more on its responsibilities as a regulator.

The Philippines is served by a second regulatory body: First Cagayan. However, following the roll-out of PAGCOR’s POGO in 2016, First Cagayan is believed to have lost a significant number of its licencees to PAGCOR. The shift reflects the turbulent nature of the market and the questions being raised over the validity of the First Cagayan licence.

The climate of uncertainty is being driven, in part, by the leader of the Philippines government, Rodrigo Duterte. On coming to power in 2016, he announced he would shut down all online gambling activity in the country, but later U-turned and said all operators and suppliers must be licensed and pay the correct tax back to the government if they wished to remain active in the market.

He also appeared to name PAGCOR as his preferred regulator, which, in turn, cast doubt over the validity of First Cagayan licences moving forward. Those considering entering the Philippines are advised to apply for a licence with PAGCOR, but to also support this with a licence from an established international regulator, such as the Alderney Gambling Control Commission (AGCC).

Avoiding potential traps

This approach should be taken regardless of which Asian market operators and suppliers are targeting. Established regulators are best placed to guide businesses through the licensing process and to make them aware of some of the potential traps ineach market. While this differs from country to country, certain key factors should always be taken into account.

Operators and suppliers should educate themselves as to the financial structures in place in each market, and whether they meet the needs of their businesses. They should familiarise themselves with the main financial institutions, and learn whether they are international, national or local. They should also understand the anti-money laundering protocols they have in place and whether they provide sufficient protection.

We also recommend operators and suppliers assess the stability of the country’s currency, as well as the process of repatriating funds. Businesses want to be able to withdraw profits from accounts held in that region to others located elsewhere, but different countries have different rules, processes and procedures. It’s important to understand these and how they affect you.

It is also worth researching player preferences in the market you are looking to enter. Consider the popularity of market-specific games: mahjong is popular in China, while pachinko is huge in Japan. Punters in some countries like to wager on their mobile devices, while others prefer to go to land-based bookmakers to place their bets. Operators and suppliers need to consider whether their proposition is a good fit.

Preparing for entry

With any new and emerging market, the key to success is balancing the risk/reward factor. Some markets will offer huge rewards, but entry carries significant risk. Operators and suppliers should only take on risks they are comfortable with, and must always keep in mind how entering one jurisdiction can affect their licensing status in another.

By working with an established regulator such as the AGCC, businesses can properly prepare themselves for launch in Asia. The AGCC has long-standing relationships with regulators and lawmakers across the continent, as well as with local operators and suppliers. This means they know exactly what it takes to be compliant in each market, and what businesses can expect once live.

Asian operators can obtain an AGCC licence from any country via the regulator’s new Category 1 Associate Certificate B2C – the only licence of its type in the world.

The AGCC is also ready to support regulators and operators in the markets pushing ahead with regulation, and those that will cross the line first. In addition, it has a deep understanding of the requirements operators and suppliers should meet, whether that be partnering with a local retail operator, the responsible gambling measures they need to have in place, and the games they can offer.

Widespread regulation is coming to Asia, but it will undoubtedly take time. Some operators and suppliers will be happy to sit on the sidelines until a clearer picture emerges, while others will want to seize the opportunity now. Those that are keen to make a move must do so in a considered fashion. The opportunities are there for the taking, but only if operators and suppliers take the right approach.

This article first appeared in iGaming Business Magazine's Asian Gaming Focus 2018.

Written by
Alderney eGambling