Innovation and Reputation - Alderney's twin strikers
Susan O’Leary explains how reputation and innovation are the foundations on which Alderney’s success has been built.
This article first appeared in Casino and Gaming International Magazine, May 2016
If you could bottle success and sell it you’d be very rich. Unfortunately, as many luckless entrepreneurs and football club chairmen know, becoming successful is not as simple as writing out a cheque. In our industry you can’t buy achievement off the shelf then sit back and watch as the money rolls in. It doesn’t work that way.
How did the ‘impossible’ happen with Leicester City winning the English Premiership this year? I believe the club identified something simple yet very special within their structure which gave them the confidence to succeed. Lady Luck and a dressing room full of passion did the rest.
In Alderney, we know there are many reasons why we’ve been so successful as an eGambling jurisdiction. However we also know that reputation and innovation have been two vital team players – a twin strike force that has differentiated us from our competitors.
Our reputation precedes us Alderney has welded a benchmark regulatory regime to an innovative commercial proposition in a way that no other jurisdiction has managed to do. On my travels around the world meeting government representatives and potential licensees our reputation precedes us. My colleagues at the Alderney Gambling Control Commission (AGCC) have produced the purest set of online gambling regulations, designed simply to provide robust but pragmatic oversight without any compromise. It works, as they are regarded as ‘best in breed’ and as such have been replicated by many jurisdictions. As you know ‘imitation is the sincerest form of flattery’.
Our industry colleagues tell us that they believe there is no better indication that a business is being run responsibly and to the highest standard than to be regulated by the AGCC. Praise indeed!
Building important relationships Licensees want trouble-free access to markets and Alderney’s reputation and its cooperative relationship with other regulators and governments ensures that doors are opened and commercial opportunities are maximised. The Commission liaises regularly with international regulatory bodies such as the British Gambling Commission, the Nevada Gaming Control Board and the New Jersey Division of Gaming Enforcement and we continue to forge new relationships around the world regularly.
We work very closely with operators and understand their businesses and in that process we have helped many who started small grow to be large and successful. We are excited about our licensee’s growth and the AGCC visit our licensees for an on-site inspection at least once a year. It is a great opportunity to discuss, discover and assess what changes are needed in the regulatory framework.
Adapting to technological change Being fleet-of-foot and quick off the mark when new technologies come along is important. Two areas that are topical and we are exploring are eSports and Daily Fantasy Sports. Most commonly eSports take the form of organised multiplayer video game competitions, particularly between professional players. The most common video game genres are real-time strategy, fighting, first-person shooter, and multiplayer online battle arena tournaments
Daily Fantasy Sports and the placing of bets on eSports are already covered by our regulatory framework. The good news for operators is that the Alderney model already regulates the betting in these sectors and Alderney would not have to change the regulations to capture them.
Virtual Reality is also another hot topic but still in its infancy in respect of eGambling. Most of the world’s major tech companies have now invested heavily in this sector. On a recent trip to GiGse in San Francisco, I was fortunate to visit a VR creative office and also try out some of the new VR products. Mind Blowing! Alderney is very conscious that in this accelerating world as a jurisdiction it is vital that we move with the times and are ready to serve the interests of the next generation of players and developers who will have grown up with cutting edge technology. Watch this space!
Multi-Jurisdictional Testing Framework One example where we feel we are making great strides is through the completion of the first phase of the International Association of Gambling Regulator’s (IGAR) working group project to develop a Multi-Jurisdictional Testing Framework (MJTF).
The MJTF project is an important step toward harmonising regulatory requirements across all IAGR jurisdictions, and we continue to actively work towards further standardisation of games software testing requirements. Working closely with gambling regulators in the UK, Denmark and the Isle of Man to assist licensees and certificate holders in achieving the best speed to market while minimising regulatory duplication and games software testing costs.
In the next stage of the process, AGCC licensees and certificate holders will soon likely benefit from standardisation of game fairness testing, which the working group has already prepared in draft format for adoption in the next phase.
Asian Betting model One of our other recent innovative projects that benefit our licensees and certificate holders is a regulatory structure incorporating the agency model for Asian betting markets. We recognised that in the Asian markets just one person on behalf of all others may place bets on popular sporting events in a typical Far Eastern extended social structure. Credit may also be extended by ‘agents’ to linked sub-accounts, where individuals can place their own bets. This is an Eastern cultural issue that is fraught with challenges for the gambling companies who wish to operate, and be seen to operate, to the highest regulatory standards. Alderney was very keen to find an answer to this problem so we got to work. Liaising closely with industry to find solutions to ensure compliance with internationally acceptable standards, specifically in the area of AML/CFT, the AGCC took up the gauntlet and explored the situation. After an in-depth review of Alderney’s regulatory requirements, which are fully compliant with FATF standards, the AGCC developed and launched the model, which is already being used by a number of licensees. Growing interest I think this is a perfect example of the innovative thinking that sets Alderney apart and from which many licensees will benefit. There are a growing number of European operators who are interested in Asian markets and the AGCC is looking to reduce their "dual regulation burden".
We are currently in active dialogue with First Cagayan in Asia, and we expect many of our licensees to hold licences both in Asian jurisdictions and in Alderney.
Asia is showing tremendous interest in what we can offer. I have just returned from Hong Kong, Manila, and Vietnam and was joined by our regulator Jorn Starck in Macau for the iGaming Asia Congress, where we spoke to delegates about how Alderney can help operators reach global eGambling markets.
Outstanding commercial attributes Of course it is not just our two top strikers that are scoring all the goals we have other excellent factors that have contributed to our success. Alderney has outstanding commercial attributes too. We are fortunate that we operate in a low-to-zero tax economy. This means that operators working from Alderney can realise the most tax efficient environment to be found anywhere. With increasing duties at the point of consumption operators have to ensure that they are as lean as possible in a world of decreasing margins and Alderney is unassailable in that position. We back that up with world-class telecom links into Paris, London and we straddle the main US / Europe cables. Our location puts us a little over 30 minutes from London airports.
New fees regime Alderney has introduced a new fees system as we recognised that our unique fee based system, as opposed to gaming duty and taxes, could be made more attractive for the new operator. There is no doubt Alderney provides the most cost-effective base but we thought we could improve it for newer entrants who will benefit from the 50% reduction in fees for their first year. We have also taken the opportunity to rebalance some of the fees at the upper scale where we had a little ‘wriggle room’.
Protection from double taxation Importantly these changes must be seen in the context of our efforts to ensure that none of our licensees pay double tax on the same activity. Other jurisdictions collect taxes and duties on play, which is subject to tax in other countries under the Point of Consumption (POC) regimes. This is very damaging to profitability and not at all helpful to the industry.
We have also reduced the cost of regulation where POC states that players will be provided protection from their domestic regulator. It makes no sense to double the effort and costs for operators when a competent authority in their target markets is already regulating them.
I do not own a crystal ball but I suspect that consolidation and the increasing cost of entry will probably reduce the amount of operators breaking in to this industry. New products, such as virtual reality gaming, will come to the fore though and Alderney is extremely well placed to become a home to those new service providers. Like Leicester City we have put together a fantastic team, our spirit and expectations are soaring and we will continue to set the benchmark for other jurisdictions to follow.