Consumer & Customer AI

How AI is transforming Online Gambling

And what it means for the stakeholders — betting companies, platform providers, players, governments, and the start-up ecosystem

Image by Chris Liverani on Unsplash

Statistics and Probability Theories were some of the significant driving forces behind the evolution of gambling as an industry for the masses. Casinos started using sophisticated algorithms and AI much ahead of any other industry in the consumer space. They were leveraging AI, using the vast amounts of information they have on their customers, to create and maintain better relationships and gain market share. Some of the areas where casinos are already using AI include marketing, automation, fraud detection, predictive maintenance etc.

But new waves of changes are building up. If you are looking for business ideas to enter / consolidate your position in this rapidly changing betting industry either as a fledgling start-up or as a large behemoth, this article may provide pointers worthy of serious considerations. Please read on.

Gambling Industry at an Inflection Point

With online gambling and betting legalized in many countries, many new avenues of revenues have opened in this industry. Take for example India, the country where I live.

As per a Deloitte India report, the online gambling industry had a 40% CAGR during the pandemic. India accounts for 13 per cent share of global game sessions, and is expected to add nearly 40 million online gamers during 2020−22. Online gaming in India is expected to touch $2.8 billion mark by 2022.

80% of Indians gamble at least once a year, with approximately 55% of casual gamers and 66% of heavy gamers aged below 24 years, according to an Indian magazine. The black gambling market in India is comparable to the size of the country’s population. The underground sports betting market alone is valued at $150 billion.

The ease of online transactions through various channels have made it easier for people to indulge in online betting. The rising number of rural consumers and women users make this space even more exciting in India.

Today’s fast-changing consumer behavior and the pandemic-induced never-seen-before scale of digital proliferation has brought the online gambling and betting industry at an inflection point. However, at the same time, the lack of experiential factors that were driving customer satisfaction in offline gambling at casinos earlier is now making it difficult to differentiate through the online modes of playing.

How AI is Changing the Industry Landscape

To stay ahead of the curve, online betting companies need to leverage the wealth of information about their customers, everything in the consumer journey funnel from how and when they reach the online platform and what interactions they enjoy to which referral programs they engage with more, to drive value for customers and ROI.

Here are 6 ways how AI is transforming the online gambling and betting industry and what it means for various stakeholders — betting companies, platform providers, players, governments, and the society at large.

1. Responsible Gambling

Gambling should only ever be a form of entertainment — value-generating, player-friendly, and sustainable. However, the dangers of gambling include addiction leading to chasing losses and not knowing when to stop. AI can identify potentially addicted gamblers, or gamblers with a high risk of addiction, by detecting problematic patterns, even before the players seek help, to adjust or filter out a player’s offering, and accordingly, reduce the number of players who suffer from gambling addiction, enabling the online betting companies to develop a safety net for players at risk. This is called Responsible Gambling.

The idea of Responsible Gambling works because there have been significant findings such as:

• Players who voluntarily set spending limits on their accounts are more loyal than players who do not.
• Players who set limits spend less on gambling but play for longer periods.
• Players who receive personalized feedback in the form of text messages and emails wager less money compared to others.

Responsible Gambling leverages AI to protect at-risk customers by constantly scanning all betting data collection points.

Responsible Gambling will relieve regulators because it will ease up a major part of their work and reduce the pressure on operators. Legalizing gambling is preferable to governments because letting online betting operate as a shadow sector will only increase the problem of gambling addiction and irresponsible gambling. Moreover, legal sectors can generate tax revenues for governments.

On the other hand, it is more profitable for betting companies to be socially responsible than to fight governments. Besides, when the customers feel safer, they are more likely to spend more, driving the customer experience and revenues higher for the company.

The technology behind Responsible Gambling can range from simple analysis of self-declared limits at the time of on-boarding (e.g., deposit limits, loss limits, maximum session time etc.) to real time comparison of new activities against self-exclusion models (how closely the activities mirror or differ from problem gambling behaviors). To this end, the platform developers and AI vendors can leverage reams of customer data / patterns including:

• Demographics (e.g., income levels, age, discretionary spend, home value, zip code details etc.),
• Behavioral data (e.g., visit frequency, time on device, trends in hours spent on games etc.),
• Transactional data (e.g., win / loss ratio, trends in daily or weekly deposit frequency and amounts, borrowing patterns, credit payment patterns etc.).

There can be different problem gambling thresholds for different types of games / betting themes since the impulsivity and inhibitions differ across different settings. Analysis of behavior can provide deep characterization of key elements in decision making, serving as the basis for individualized feedback to the players, while adjusting for each customer’s self-exclusion scores dynamically, to identify when an individual customer should be considered at risk.

2. Novel Ways of Betting

It may sound like a science fiction, but AI will enable newer ways of betting.

Gambling will enter everyone’s daily life, much like the social media of today.

Here are a few novel ways betting can happen in future. Eager and enterprising entrepreneurs can turn any of these ideas into profit-making ventures.

• Crypto Betting: Given the high volatility of cryptocurrencies and the rate at which new cryptocurrencies are being innovated, people will bet on the trends and survival of cryptocurrencies.
• Celeb Life Event Betting: If enough people bet on a celebrity’s life events (e.g., who will be her next date, where will she travel for her next holiday, which designer will she wear for her next party etc.), a crowdsourced betting system can materialize.
• Concept Trend Betting: Players will bet on the trends of words, phrases, issues, ideas, concepts appearing on social media within a fixed period.
• Auction Betting: People may put wagers on the maximum bidding an auction (for any public auction, from a painting to a sportsperson) may draw.
• Fantasy Leadership: Teams of CXOs around the globe could be created and wagers could be based on the balance of monthly, quarterly, or yearly media coverage received, or shareholder value created.

3. Deeper Personalization

Not only segments or cohorts or clusters, but truly individualized personalization is possible with AI.

Platform providers will be able to leverage customer data for accurate reflection of a player’s state of mind in real time. This will empower deeper personalization for customer offerings, driving more satisfying in-game experience for the players.

• Live, Personalized, Deeply Relevant Content in Real Time: Personalization to adapt and shape in-game experiences to real time preferences of the player will happen, when it is most relevant to the game as well as the user. Relevant recommendations while the user might be browsing through events would be more likely to engage the user than ever. AI will be able to suggest best personalized bets instantly after game events such as a goal or a corner kick in a football match.
• “Bets You May Like”: Knowledge of a player’s preferred content can enable companies to dynamically present the player with the best possible bet / game without any need for searching. This would save players time sifting through what can sometimes feel like an endless list of games. This can happen organically, based on interest categories and trends and opportunistic analysis of unsold betting inventories. AI can suggest related games, game themes, leagues, teams, athletes, sports to the one the players are already interested in. Such granular insights will help the platform providers to curate the homepage into a selection of games that are guaranteed to appeal most to the customers.
• Realistic, “Human-like” Services: By understanding the reasons behind why consumers behave in a certain fashion, AI can drive the consumer behavior! Which elements of a game make the game more popular or why users stop playing a particular game or why they switch to another platform can be understood by AI. The rise of augmented intelligence is set to provide more realistic and immersive gaming experiences with “human-like” services to customers.

4. Active Management of Customer Lifecycle

AI is enabling more active management of the entire customer lifecycle in many ways. Empowered with these insights, online betting companies will be able to design and budget their marketing strategies more effectively, from customer acquisition to customer retention.

• Customer Lifetime Value (CLTV): AI can accurately predict a player’s lifetime & future value, which helps companies to manage potential high value customers early on and provide personalized offers to improve retention.
• Acquisition and Retention of High Value Customers: AI can predict which customers have the potential to become a VIP or which tier a player may hit in near future. Churn models can predict the probability of a customer churning in the next 7, 14 and 30 days. Such insights are treasure trove for customer lifecycle management purposes.
• Cold Start Problem Support: Today’s machine learning models can predict CLTV with over 80% accuracy using only the first 2–3 active days data. Many AI solutions provide the Cold Start Problem Support natively, providing relevant results from a user’s first visit, even before the user placed any bet.
• Loyalty: Trends and performances of referral coupons can be analyzed to understand the effectiveness referral programs as well as the loyalty of the customers. Such insights can drive the strategy and management of loyalty programs.

5. More Efficient Cash Flow Management

By detecting patterns and trends in the customers’ billing history and gaming habits, AI can help online betting companies to predict their cash flows more accurately and manage their working capitals more effectively as a result.

• Next Deposit: AI can be leveraged to understand a customer’s spending preferences and predict the time and value of the next deposit. By combining this with the insights from a customer’s repeat visit pattern, the likelihood of a customer making deposits in the next 7, 14 or 30 calendar days can be forecasted in advance, along with the amounts.
• Credit Risk Assessment: AI can enable the assessment of credit risk of patrons and suppliers, which can help companies with tactical and strategic business planning imperatives.
• Revenue Maximization: Online betting companies can leverage AI to maximize revenues by rearranging how and when to present which betting games and to whom, enabled by accurate predictions of events such as how many days a player will be active in this month and during which times of the day, resources needed during the peak and non-peak times, right pricing etc.
• Offer Optimization: AI can help companies improve offer ROI by targeting the right customers at the time and optimizing all bonus spending. Enabled with recommendations on when and how much to bonus each player based on past activities, they can increase or decrease the frequency they contact or provide offers / bonus to the customers.

6. More Sophisticated Fraud Detection

Online betting companies are usually at a disadvantage compared to their offline counterparts when it comes to security — because there are no cameras or security personnel to monitor the deception. Illegal use is AI-powered bots, with algorithms less likely to commit human errors, spin slots endlessly to increase the likelihood of getting jackpots and win with a probability of 5–10 times more often than ordinary players. The platform developers try to identify and block them, and the bot developers come up with new strategies again, and so on ad infinitum. This is a cat-and-mouse game of cybersecurity, where hackers and defenders keep outbidding each other.

However, AI can detect potential frauds and enhance anti money laundering capabilities, allowing betting companies to take necessary actions faster by catching out fraudsters and cheaters before they are able to do any damage to the business or other players.

Potential Downsides and Conclusion

The capabilities of AI and the applications it powers have been growing exponentially. Machine Learning models are being trained to learn the personal traits and behavioral patterns at mass scale leading to hyper-personalization in everything we do. And now, AI is set to transform the online gambling and betting industry in big ways. This means significant changes pertaining to every stakeholder — AI will bring in positive impacts such as richer and safer in-game experience for the players, opportunities to add value through innovations for the platform developers, profit maximization through deeper understanding of customers for the betting companies, and lesser overheads to enforce regulations for the governments.

There will be negative impacts too, especially in the areas of privacy and safety. Currently there are no regulations for automated AI solutions. AI could be used as a tool to keep players hooked by using data to predict and manipulate their behavior. AI, like any other tool, can be a formidable weapon in the wrong hands. But with the recent impetus and awareness around responsible and bias-free AI, the data protection laws, and right AI governance, the positives will outweigh the negatives.