As betting incumbents seek greater independence, flexibility and individual customisation from standard platform provisions, Simon Trim, Chief Executive of Sporting Group / Sporting Solutions details to SBC that automation should be treated by leadership as a core corporate function.
SBC: Hi Simon, great to catch up on this intriguing subject matter. Can you explain ‘betting automation’ to SBC readers? From your leadership perspective what key functions in betting’s value chain can or should be automated?
Simon Trim (CEO – Sporting Group / Sporting Solutions): Put simply, automation involves embracing technology to deliver solutions which require no manual, or human, intervention. While automation of the risk function is well-established in other industries – such as the financial sector, which utilises automated algorithms to manage the risk of portfolios – adoption has been muted in the sports betting industry.
This failure to adopt automated risk solutions means the industry now has a systemic weakness in a fundamental part of its value chain. Manual risk management is not fit for purpose in the modern market landscape as the exponential increase in the number of events offered means operators can no longer manage exposure efficiently. Currently, the only risk management undertaken by many operators is to simply restrict the size of bet customers can have, unless they are sufficiently “recreational” in nature.
While other managed, or manual, trading solutions (MTS) give operators the opportunity to outsource the risk function, swapping one manual head for a cheaper one doesn’t address the underlying issue. That is why we at Sporting Solutions have developed our automated Risk Adjusted Pricing (aRAP) to address this missing link of the operator’s value chain.
The dynamic pricing function of aRAP has been developed using risk management algorithms to underpin a solution which is scalable (able to manage the whole book effectively), objective (highly configurable settings vs. subjectivity of manual risk managers), and real-time (vs. latency of manual price moves).
Given the increasingly harsh commercial environment in which sportsbooks must operate, risk management is a core area in need of automation to help operators not only survive, but thrive in tightening market conditions.
SBC: At a product level, bookmakers have pursued deeper front-end customisations as a means to differentiation and engagement. Can these desired dynamics be achieved with legacy risk management functions?
ST: While front-end customisation can deliver short-term boosts to customer acquisition and engagement, initially innovative developments – such as cash out or build-a-bet – quickly become standard fare across the industry. The inherent absence of IP in the product sphere, combined with a legacy pricing and risk management function capable of producing only homogenised pricing, has resulted in a uniformity of offering, with expensive marketing and bonusing increasingly the ”blunt weapon” for operators looking to attract and retain customers.
Our aRAP solution drives differentiation which is tangible and sustainable through price. It is bespoke to each operator, as our automated tooling analyses individual operator liability (and customer data, where applicable) to adjust prices based on both total exposure and the risk preference of the operator.
SBC: As a subject matter, to what extent does automation conflict with traditional betting stakeholders?
ST: The growth of in-play betting – which we have pioneered since 1992 – has been largely powered by automation. As such, automation should not be viewed as incompatible with traditional betting stakeholders, but viewed as complementary.
At Sporting Solutions, events are initially priced and traded via a combination of Sporting Solutions established algorithms and expert trading teams, utilising trading insight which can’t be automated, to deliver the best “base prices” in the market.
However, automation is necessary with a view to embracing trends in big data, artificial intelligence and behavioural economics – all of which are important themes for the industry and none of which can be carried out via a manual trading service.
By way of example, to enhance aRAP, we developed Profile – automated customer analytics tooling built to query reams of anonymised information and “grade” the client base. Profile provides a basis for objective risk management based on the skill level of the customer placing the wager and can be integrated alongside aRAP, allowing for real-time price optimisation based on specific consumer activity rather than just total exposure.
SBC: Do you worry that a reliance on automation by bookmakers could lead to generic market propositions for betting end-user (same product and same pricing)?
ST: Over the last 10 years there has been a market move to homogenised pricing, which worked for operators when cost of operations and taxation levels were lower. As I touched upon earlier, automation of the risk function is a means to greater differentiation in pricing, which we see as the solution for operators to be successful in today’s much harsher market conditions.
The biggest threat today to a unique customer experience is the adoption of white-label or “turn-key” solutions. These “one-size-fits-all” propositions typically rely upon scraped pricing – generic by definition – with limited customisable front-end technology, which is why you can visit the website of two “different” white-label sportsbooks and the only difference you will see is the colour.
Sporting Solutions’ Risk Management Services (RMS), of which aRAP is a key vertical, has been designed to be agnostic to the bet engine, and to allow the operator to retain full control of its front-end, brand and tone of voice, as part of a specialised, best-of-breed solution.
Furthermore, RMS’s in-built “self-trade” mechanism enables operators to maintain a local pricing strategy for their own market – be that AFL in Australia, or Handball in Denmark – to further customise and differentiate their offering.
SBC: Overall what do you feel automation will deliver to the industry in terms of innovation and new processes? Why should we bank on automation as a new discipline?
ST: When compared to current manual solutions, the advantages of an automated risk function are clear. Increased objectivity, scalability and minimised latency translates to greater turnover, improved margins and enhanced profit certainty.
By addressing and investing in automated risk management technologies, operators can secure and build upon their market position, giving them the freedom to pursue a long-term innovation strategy, rather than the constant battle to merely stand still that characterises the industry today.
Simon Trim – CEO – Sporting Group / Sporting Solutions