Salad Money, a social enterprise and social purpose lender, has analysed transactions of those applying for credit and revealed that harmful, heavy gambling is on the rise, with people turning to lenders to help fuel their addictions.
In its report, Salad Money examined 200 million transactions from more than 177,000 people with an average net income (including benefits) of £34,000. It found that 15 per cent of people spend over £500 a month on gambling, with 10 per cent spending more than double this monthly. What makes these findings more shocking is how gamblers are paying.
Salad Money has found evidence to suggest people are funding their bad addictions using credit. This is being facilitated by poor checks from lenders as they do not identify harmful gambling issues with vulnerable customers. Seventy-six per cent of those spending over £1,000 per month on gambling have been making repayments to other loan companies.
Lord Iain McNicol (Labour) and Baroness Natalie Evans (Conservative), of the Salad Projects Oversight Body said: “More than a year after we raised concerns that harmful gambling was increasing, with clear evidence of cases fuelled by credit, the picture is bleaker still.
“The data reveals disturbing evidence about this cohort of working people whose salary is close to the UK average.”
Benefits of open banking
According to the social purpose lender, open banking can easily identify heavy gambling habits. Interestingly, Salad Money uses open banking for its affordability checks rather than credit scores. On average, it found each applicant has 1,800 individual transactions spanning the previous 12 months. Salad Money categorises these to make an approval decision and generate unique insights into applicants’ financial health.
Between 1 January and 31 March 2024, Salad Money declined 58,555 people – 33 per cent of applicants – because of excessive gambling. This figure has increased since 2023. Last year, it declined 29 per cent of applicants in the first quarter because of the level of gambling; in the same period in 2022, it declined 25 per cent.
Salad Money cross-referenced applicants (for whom it had made an open banking-powered lending decision) with the credit score provided by a credit reference agency. Salad Money declines the same proportion of applicants for gambling with sub-prime (high risk) credit ratings as it does for super-prime (meaning those supposedly representing very low risk).
Further findings from the research include:
61 per cent of the 177,089 applicants (mainly NHS and public sector workers with ’near-prime’ and ’sub-prime’ credit profiles) had gambled during the three months before their loan application (compared with 56 per cent of applicants in the same time period in 2023).
27 per cent of applicants spend more than £100 per month on gambling (compared with 22 per cent of applicants in the same time period in 2023).
15 per cent of applicants spend more than £500 per month on gambling (compared with 12 per cent of applicants in the same time period in 2023).
10 per cent of applicants spend more than £1,000 per month on gambling (compared with eight per cent of applicants in the same time period in 2023).
In Q1’24, 38.1 per cent of male applicants and 25.4 per cent of female applicants were declined for gambling.
Of those declined for gambling, over half spend more than £440 per month on average. They make 44 gambling transactions per month on average, but 13 per cent make more than three gambling payment transactions every day.
For people declined, gambling accounts for 17 per cent of their entire expenditure on average, while for six per cent of them, gambling accounts for more than half of their expenditure.
Does a credit score reflect gambling?
Gambling propensity is not correlated with consumers’ credit ratings and many other lenders are not identifying heavy gamblers. In fact, credit bureau data is completely ineffective at identifying gambling propensity.
Historically, gambling transactions have not been visible to credit reference agencies so their data remains a weak predictor of excessive gambling.
Case study 1
In the first case study, Salad Money revealed information on a male in his 30s, works in healthcare, and has approximate annual salary £23,000. Let’s call him applicant “A”.
During the 12 months preceding his application to Salad Money this individual gambled a total of £99,545 and won £51,000.
During the same period, he made credit and buy now pay later (BNPL) repayments totalling £17,914. He was also accepted for four new loans from three different providers totalling £6,790. Salad declined this applicant and signposted gambling support.
Case study 2
Salad Money’s second case study was on a male in his 30s. He lives Wales, works in financial services and has an approximate annual salary of £49,000. He’ll be called applicant “B”.
During the 12 months preceding the application to Salad Money, this person gambled a total of £347,427 in 1,136 separate transactions, spending £951 on average every day.
During the course of the year he ‘won’ £140,359; made credit and Buy Now Pay Later (BNPL) repayments totalling £43,713 and was accepted for new loans from four different providers totalling £5,200. Salad declined this applicant and signposted gambling support.
Identifying who should and shouldn’t be granted a loan
Lord McNicol and Baroness Evans also added: “Many heavy gamblers had been granted new loans from other credit providers making astonishing decisions, like the three lenders who extended credit to Applicant A. Harmful gambling is increasing. Many credit providers are making poor lending decisions and failing in their duty to protect vulnerable customers.
“We implore policymakers and the Financial Conduct Authority, Financial Ombudsman Service, UK Finance, credit providers, the Department for Culture, Media and Sport (DCMS) and the Gambling Commission to review this evidence and act appropriately.”
Will Prochaska from the Coalition Against Gambling Ads said: “It is horrifying that people are being preyed on by the gambling industry, and that some lenders are helping to fuel that abuse. Open banking data is lifting the lid on what the gambling reform movement has suspected for a long time, and it should be a catalyst for real change in the gambling and credit markets.”
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