Series Six, Episode Five – Digital Resilience, Regulation and Risk – Financial education and the regulation of financial services

Julia: Hello, my name is Julia Streets and welcome to Divercity Podcast, talking about equality, inclusion and diversity in financial services. On the podcast, we seek to shine a light on positive progress, call out areas requiring further focus, and offer lots of ideas to help drive change.

Today I’m joined by Lee Willows, CEO of the Young Gamers and Gamblers Education Trust, and Gavin Stewart, regulatory consultant at Grant Thornton.

Lee Willows is the founder of the Young Gamers & Gamblers Education Trust, the charity he founded based on his personal experiences with gambling. The UK registered charity is committed to informing, educating and safeguarding young people against problematic gambling and social gaming. Lee has spent some 25 years in the education and third sectors, progressing from a front line teacher and youth worker for youngsters age 16+ to holding senior leadership positions with youth support initiatives that include the Kingswood Learning and Leisure Group, and the Prince’s Trust. Lee, a very warm welcome to the show.

Lee: Hi, there, Julia. Good to be here.

Julia: Gavin Stewart has worked in the field of financial services regulation for nearly 30 years, for the Bank of England, to the FSA and the FCA, where his 10 years included a role as the FCA’s Chief Risk Officer. During his time with the regulator, Gavin was a member of the Executive Diversity Committee, an executive sponsor of Inside Out its LGBT network. Beyond the world of risk and regulation, Gavin has represented Great Britain on an international rowing stage, most notably at the Seoul and Barcelona Olympics and led the Lottery Award Strategy as a former Board member of UK Sport. In 2016 Gavin joined the professional services team from Grant Thornton as a regulatory consultant. Gavin, welcome to the show.

Gavin: Thank you.

Julia: As always at the start of the show, we invite each guest to talk about what they’re up to at the moment. Lee, let me come to you first. What are you focused on?

Lee: To answer your specific question, I’m a former gambling addict, and with others we incorporated the Young Gamers & Gamblers Education Trust four years ago. What’s preoccupying our time at the moment is all around building digital resilience and financial well-being amongst young people, because there’s more and more people gambling and gaming in the United Kingdom.

It’s the activity we don’t seem to talk about in schools, colleges or universities. We talk about sexual health, we talk about responsible drinking, we don’t talk about gaming or gambling. Just think, if you’re a parent at home, your children may well be on their mobile phones or on their tablets playing games. What are they playing? How long are they spending on their devices? And how much money are they potentially spending? What’s preoccupying our time at the moment is getting our message out around digital resilience and financial well-being.

Julia: Fascinating. We’ll certainly come back to much of that in the show as well. Thank you.

Gavin, how about you? What are you focused on?

Gavin: At the moment I’m spending most of my time, an increasing amount of my time, on the application of technology to regulation. RegTech for the shorthand, which I think is going to transform how financial services works over the next, let’s call it a decade, but it’ll be sooner in many respects I suspect. That has all sorts of quite complex and dynamic elements to it. There’s a whole question about the governance of how changes are made. There is a whole question around how you save money out of it and what you do with that and the business change involved, the additional accuracy and flexibility it gives to the regulator, and the potential to solve really important problems around making the financial services industry better protected against money laundering, terrorist financing, and so on in the way that it’s exploited at the present.

Julia: Picking up on that, there’s been an argument for having greater diversity at the table of Governance Risk and Regulation or GRC, Governance Risk and Compliance. What degree do you think the world has shifted and there’s a greater appreciation for that?

Gavin: To a large extent, I think the argument in terms of what’s important was won a while ago. I think putting that into practise is proving much harder for a whole variety of reasons. The hearts and minds of people in terms of diversity and inclusion have proved much harder to shift, to open up what this really means for you as an individual working in a firm with other people who have different diversities and different identities, has proved much harder. I think the action plans in terms of changing the status quo and moving that forward have been less effective than people hoped at the time, still hope. I also think that the complexity of identity and the debate around that has become more complex in the last decade.

Julia: As you look at that, are there particular areas that have impressed you in the industry where you think we should do more of that? Are there sticking points which you think require some focus?

Gavin: I’m sure there are lots of really good things. When I hear ideas and people talk at conferences and elsewhere, I always think, I wish I had really thought of that. What I haven’t seen, partly because I’m not close enough to it, is how effective they really are, both immediately and over time, and how well they are accepted by the wider workforce. I suppose the other thing is the ability to really track them effectively to get hold of the right information to interpret it in context and understand what it really means.

Julia: Where there’s a challenge, innovation can quite often solve that. You mentioned about the world of RegTech as well. Are you seeing any interesting developments in the world of RegTech that you think are very hopeful for driving change?

Gavin: Technology opens up a whole range of opportunities, but what you see at the moment is quite often, as the way of these things, the problems come up first, from everything to do with who writes the algorithm and what’s it based on and how diverse is that, down to, when you start making changes within organisations, how do you actually do that? Because it drives quite a lot of uncertainty and insecurity, and that then brings to light lots of identity stuff potentially that people just roll with in the normal course of business.

On the other hand, I think there’s a huge amount of scope for greater accuracy of information, understanding what you’re dealing with, taking drudgery out of a lot of people’s jobs to a great degree, allowing them to focus on the bits of their work that they really enjoy and do more of that, and the flexibility and so on that comes with that. But there’s a level of self-awareness in there as well that I suspect not every organisation is well equipped to deal with. When you really understand what’s actually happening across of all your departments in a way that you probably can’t at the moment.That will bring a whole set of responsibilities and obligations and pressures with it.

Julia: And of course, there are many questions coming to light about biases in technology and biases in data. You mentioned about privacy and security.

Gavin: The problems always come up and, without going into it here, we know all the reasons why that is. It’s fundamentally really important, because otherwise it will kill off the rest of it. So we have to sort it.

Julia: It’s one of the things we talk about a lot, actually, and I think going forward as we look at the next series and beyond is the role that diversity inclusion plays in negating the risk of bias and therefore the complexity within technology as well. Really fascinating. It’s great to have you on the show. Thank you for your thoughts on that.

Let’s just take a little bit of a step change away from that, but of course there are some natural segues between the question around identity, privacy, and of course technology. Lee, in the construct of the discussion around disability, we talk about mental health a great deal, and it’s wonderful to have you on the show talking about gambling and gaming, as you were saying at the beginning about some of these trends that are happening as well. Let’s just take a little step back, if you would, to talk about your personal journey.

Lee: It’s really interesting to listen to Gavin as well, because I think tech has a real important part to play in protecting the vulnerable, and I’ll perhaps talk a little bit later about how the bank and the financial services might want to approach that.

YGAM, Young Gamers & Gamblers Education Trust, we are actually known as YGAM, how was the organisation set up? Well, it is quite an interesting story. Five years ago, I went into the casino for the first time in my entire life before, never gambled. My parents didn’t gamble. I’ve got no friends who gamble. We had tickets to go and see a show at the ITV studios on the South Bank. We had the wrong tickets, we couldn’t get in, so one of my friends says, “It’s raining, so let’s go to the casino.”

We walked across the bridge over the Thames, into Leicester Square, inside a casino, and that day absolutely changed my life. You can imagine there was five of us there, all a group of lads, all in our late thirties, having a few beers. Some people were on the tables, and I was on the slot machines in the casino. I put a couple of pounds into a machine, and I won the jackpot. I won £4,000, and I’d only been in the casino for an hour and a half or something. I’d won the jackpot. I cashed that in. Obviously, the drinks are on me for the rest of the afternoon. But that triggered a pattern of behaviour which is really interesting, because I left the casino that night, went back home, and then the following day, I thought, “Oh, I’ll pop back to the casino again after work.”

I went back to the same casino again with some of the money that I won the day before. I went back on the machines, gambled away again, didn’t win anything. That started a curiosity, because I went back the following day, thinking, “actually, I just might get a little bit of money here.” So I went back in the following day and again won a little bit, lost a little bit. What happened then, and for the space of two and a half years, I became absolutely addicted or dependent upon the machines in the casinos. They are called B1 machines. They are regulated by the Gambling Commission. I didn’t play on the table games, didn’t gamble online, didn’t go inside the betting shops, but there was something about the machines that hooked me in effectively.

I’m a sensible Northerner, I’m the son of a miner, and my dad said to me at a young age, he said, “Lee, make sure you save your money, son.” I had spent a lifetime saving money. I actually had quite a bit of money that I’d saved up, and my appreciation of money, my understanding of money went totally out of the window when it came to gambling, because I often over-indulged. What do I mean by that? Is that nest egg of savings, that went down, at this point, I was probably gambling five days a week or six days a week, and because the casinos are open 24 hours a day, I would be in there in the mornings before I go to work. I then go and do my Chief Exec bit in work and then go back home in the evenings via the casino again.

I guess after a period of about six months or so, I was probably spending 30 to 40 hours a week in the casino. Sometimes I’d go in on Friday after work and I’d pop out Saturday afternoon. It became a real fixation in my life, and I developed a dependency upon those machines. All this money I had, I spent it. I spent it within six months. I needed to get hold of some more money and I couldn’t stop gambling. I tried to stop, but I couldn’t stop. The level of euphoria, and listeners who know a little bit about addictions, particularly behavioural addictions, it triggers dopamine in your brain, and that high level, it’s an incredible feeling. I wanted more and more and more.

I ran out of my own money, so I turned to the banks. I had a clean credit file, so I applied to the major banks and I was able to get unsecured loans. I had a number of unsecured loans. I was making very poor financial decisions, because I had a range of loans. I lied to get some of those loans, obviously I wouldn’t be saying to the banks, “I’m going to use it on gambling,” so I lied to get the loan. I had different bank accounts and different email addresses.

After about six months, all the money ran out from the loans and I couldn’t get any more money, but I still needed to gamble. I just couldn’t stop. I’m quite a sensible, boring person, especially when it comes to money. I’m really good with money. I turned to payday loans, and I had something like 46 payday loans. Would you believe it? All small amounts, all £200 – £300 at a time, but because the urge was so strong to gamble and I couldn’t stop, payday loans provided that opportunity for me to continue to gamble.

It gets quite worse, because when I hit a point when I could 1) No longer pay back the loans to the payday providers, but also I was being found out, because I had multiple loans and my credit file with Experian was going down and down. Of course I’m gambling, so what I did then is I stole money to feed the addiction. This is completely out of character, and it’s something I think about every single day and I am thoroughly ashamed of. I stole money from my previous employer to continue the addiction, to continue feeding my trips to the casinos. I stole £19,000 and I spent it quite quickly. Then I remember I was going to take some more money out of the organisation that I used to work for, but I didn’t. I thought “I can’t stop gambling.” 

2)  I’ve now done a horrendous thing. I’ve committed a crime to feed my addiction. I didn’t even steal a Mars Bar as a child at school. If I can’t stop, I need to do something about this. The only way out I could see was to take my own life. In September 2013, I had a little bit of money left over, and often in life, we don’t get to choose when or where we die. I had a choice, and I’m a stubborn Northerner and even to this day, I’m quite surprised I didn’t go through with the suicide, but I thought, “If I’m going to kill myself, I’m going to go somewhere beautiful and do it, and somewhere far away,” in a false hope that nobody would find out, because up until this point, the gambling, the secret life, all the struggles with money was all a secret. Nobody else knew. I kept this totally to myself. It was almost like I was living a double life. By day, I was a successful Chief Executive running a fantastic organisation, but my goodness, I was really struggling inside with the addiction.

So on the day of the suicide, I was going to fly over to Bangkok to a beautiful little island called Koh Lipe off the coast. I was going to kill myself. On that morning I was going to get on the plane, my mum (thank you mother!) left me a message on my phone. It said, “Lee, how are you? Give me a call back. Hope you’re well.” She had no idea, that her son was about to board a plane to commit suicide. That phone call stopped that. I then went and saw the Chairman of the organisation that I used to work for. I told him about the addiction, and also within the same breath I told him that I stole the money. Then I went into treatment, I told my parents and it took six months of treatment to get gambling out of my mind, the pull of gambling was so strong.

I suppose relevant to today’s programme, I had to go bankrupt. It’s absolutely terrible that somebody who has been so careful with money all of his life had to go bankrupt. I went to court for the money that I stole, which is a breach of trust, and I wasn’t expecting this at all, but the judge gave me a suspended sentence for two years, which is now spent. It’s been quite an interesting journey, and it’s been a journey where I have totally ruined my financial record, and now it’s a journey of trying to rebuild that financial record. It’s a journey of trying to, with my experience in teaching and youth work with the YGAM team, talk about responsible gaming and gambling across the United Kingdom.

Julia: First of all, can I just say thank you for sharing an incredible story. It’s been incredibly generous of you to do that. How inspiring now that you’re helping others. How did the initiative begin? That first step in and of itself must’ve been a scary positive one?

Lee: It’s quite interesting because everybody says, “Oh, it’s really inspiring, Lee.” But actually, I’m really disappointed in myself for what I’ve done. I put a lot of shame upon a lot of people, and I have had to restart again in a whole range of things. So what we do now moving forward? In 2014 we looked at: Do we talk to young people about financial education, particularly when it comes to gaming or gambling? The answer to that question was no. Do we talk to young people about some of the potential risk associated with that activity and some of the personal consequences? The answer to that question was no. We set the charity up, and as you said earlier, our social purpose is to inform, educate and safeguard young people against problem gambling and gaming, and effectively we train teachers to deliver our programme.

A strong element of that programme is all-around financial education. Then secondly, we train and employ students in partner universities to deliver the programme to their peer group. As you can imagine students, 18, first time away from home, some of them do see an opportunity to gamble is to make money. We believe in YGAM that a lot of people gamble responsibly and within their means, but there will be some people like me who cannot control their gambling, like some people cannot control their drinking. This type of education, this type of financial awareness we think is really important.

Julia: I suppose there are three things that come out of that for me. One of them is around vulnerability, and we know there’s in FCA, something that the FCA is really keenly looking at in terms of vulnerability and financial capability sort of structure there. The second is around technology and how technology is perhaps, I don’t want to say it is an enabler, but also has a role in terms of perhaps assisting with some of the patterns and regulating some of those patterns. And then the third is also the financial services industry and organisational response. Why don’t we unpick each of those? Let me bring in there Gavin around the question about vulnerability and the regulatory dynamic around that?

Gavin: This has quite a long history. When the Financial Services Authority was set up in 1998, raising/promoting public awareness was one of its objectives, and there was a lot of financial capability work came off the back of that over the next 10 or 12 years. In particular, there was quite a landmark financial capability survey in 2006. It’s been widely used internationally, and the FSA and now the FCA has developed that. There was a financial lives document that came out last year. It’s always been a focus. 

The problem, of course, is that on the one hand, financial products have become more complex and arguably more opaque over the years, despite lots of explanation and disclosure. To be honest, austerity hasn’t helped, so there’s less income. Household debt built up before 2007, and it’s been building up again in the decade since, after having dropped during the recession itself.

There’s lots of pressures in that world, and we’re all vulnerable at some stage of our lives financially, for whatever reason, whether it’s a major life event or illness or just we don’t have much income coming in through the door. It’s very, very hard to unpick that. The other thing that’s probably worth throwing in is that, I think the research backs this up, though I don’t have any of it to hand, but I think people find engaging with the complexity of financial services frankly less interesting than a lot of other things in their lives, even if they can understand it. One of the other things the FCA is doing at the moment, there’s consulting on a duty of care to see whether it would be worthwhile to raise the benchmark of what’s expected of financial services firms when dealing with their customers.

Julia: Which is a secondary that I was really keen to look into, the organisational interaction. Lee, let me just ask you here, in terms of are there things that the financial services industry should or could be doing?

Lee: It’s really interesting. I’m obviously learning quite a bit on the journey to establish the charity. We must understand that if you are a gambling addict, you’re addicted, it’s no different to being addicted to a substance as what it is being addicted to a behaviour. Gambling is obviously a behavioural addiction, and there’s some really good work, and Gavin will be familiar with this, coming out of the financial sector.

For example, as a customer of a bank, if I want to take the step to what’s called “self-exclude myself”, so I cannot gamble, there’s a gambling transaction code on one’s debit card. There are some banks that are offering customers to make that code live, so effectively then I cannot go and gamble online. That’s a really good example of where the financial sector is helping, and that’s something really practical as well, because I think once you activate that self-exclusion, once you speak to your bank, that block can be put upon your account, so then you’ve got no access to money.

That’s really important, because I think if you’re addicted to a behaviour or particularly to gambling, you need three things. You need time, opportunity and money. You’ll always make time to gamble. There will always be an opportunity, just think of the amount of opportunities there are to gamble. Access to money is probably the most important thing that can restrict your gambling, that can then help you to become abstinent. So effectively, I think blocking the transaction codes for gambling is actually brilliant. I think the financial sector ought to consider adopting that across the whole of the sector, for all banks, for certain customers.

Gavin: I think it’s a fascinating area. A couple of years ago now, I think, the FCA ran a tech sprint around mental health, which came up with a whole range of potential ideas and solutions, along some of the lines that you’ve been talking. I think technology at the moment for a lot of firms is an inhibitor. I think at some point that will change, and then I think there will be a real debate around exactly what the role of the financial services industry is and should be. How much of a duty of care should it have, how much should it be inhibiting people’s unhealthy behaviour, if you like? There’ll be lots of opportunities that come along, but there’ll be some quite big debates about privacy and independence and freedom of action and so on that come with it.

Julia: On one side it’s an inhibitor, but of course on the other side it’s a great enabler, in terms of thinking about the social gaming or social gambling and the platforms that are coming out as well. I’d love to hear your thoughts around how technology in the enabling side, is it out of control or does it require some structures around it?

Gavin: Could I just add one thing before you come in, because I think the other thing that will be really important is the extent to which we trust financial services firms with private information. At the moment, they have all our financial information, but actually, once you start trusting them with really quite sensitive areas, other sensitive areas of your life, then that opens up a whole different world.

Julia: Why do you need the money and what are you going to do with it?

Gavin: Yes, and when you say “please block me on this”, are they going to do a read across? What does it mean? What are they going to read into it? How will they interpret it?

Julia: Yes. Interesting.

Lee: If you think now that the mobile phone has given rise to any child of any age to be in their bedroom at night doing gaming or gambling. Obviously, I am from the Commodore 64, the Atari days.

Julia: So that’s ’81 for me.

Lee: I used to play those games, and they were great. What’s interesting nowadays is those type of games still exist, but the large gaming companies, and obviously gambling is regulated in the United Kingdom by the Gambling Commission, who do a very good job, whereas social gaming isn’t. The difference there with social gaming, you’re not necessarily waging money to win money. But what’s quite interesting is those games that I used to play as a child are still available now, here’s an option for a child to purchase what’s called an in-app purchase.

If you want to complete the game in a quicker amount of time, you might pay a mobile phone provider £3/£5/£6, which should give you three extra lives to progress, or you may get what’s called a skin for your weapon to procrastinate in a shoot-em-up type game. Or there’s even things now called loot boxes, which will enable you to make a purchase of an unknown object that may or may not advance you in the game. The games have come on in huge bounds, really good. But I think what the difference now is, there’s an opportunity to mix money into that, which there wasn’t there before.

Julia: Well, I think that’s a good moment to just take a pause there, and we’ll turn to Robert and Cynthia for some research to support today’s discussion.

Cynthia: A 2018 study from Juniper Research found that spending on RegTech platforms will exceed $115 billion by 2023, which is up from an estimated $18 billion in 2018. The research found that increased regulatory pressures demonstrated by GDPR implementation is driving businesses towards RegTech to meet greater compliance challenges.

Robert: The research found that increased regulatory pressures demonstrated by GDPR implementation is driving businesses towards RegTech to meet greater compliance challenges. Any heavily regulated business not prioritising RegTech adoption would risk damaging fines from failing to keep up with regulatory changes.

Cynthia: The report also highlighted that the sharp increase in RegTech spending, an average of 45% per annum between 2018 and 2023, was far higher than that of compliance spend as a whole, reflecting the rapid migration of spend to RegTech from traditional methods.

Robert: In 2018, Accenture surveyed 2,000 adults in the UK in order to understand how people felt about the personal information that is collected about them online and which types of organisations they trusted with their data.

Cynthia: People were least trusting of marketing companies by 75%, social media networks by 71%, dating sites by 70%, with 54% saying they saw no benefit to letting companies holding their data.

Robert: Respondents were most trusting of their personal data with banks, insurance companies, and the health services.

Julia: Thanks, Cynthia and Robert. The links to the research can be found on our website, divercitypodcast.com. That’s where you can find all our episodes and sign up for early notifications of future recordings. Please do follow us on Twitter @divercitypod, and DiverCity Podcast is available on BrightTALK and all good podcast channels. We’d love a rating because it all helps to promote the show.

As we head into the last section of the show today, this fascinating topic, one thing I keep thinking about is we’re arguably heading into more challenging financial times, and I wonder what advice you’d give our listeners, both as individuals and as organisations? Lee, let me come to you first.

Lee: I think from a gambling perspective, there’s probably three things, really. 1) Set a budget. It sounds really daft, but the amount of problem gamblers I’ve met over the years who don’t set a budget, so set that budget first of all. 2) If you are finding you’re spending too much time or too much money gambling, then speak to somebody. There’s a great organisation called GambleAware. The website is begambleaware.org Lots of information, advice and guidance on there as well, if you think you’re spending too much time or money. 3) Remember that gambling should be a pastime social activity, really, so see it as that.

Julia: Gavin, let me bring you in here. Final thoughts that organisations should be thinking about in the risk of the regulation.

Gavin: I think there’s a couple of things. One is that in an organisational sense, there’s an awful lot that is coming to rest with middle management. There’s a lot of top-down commitment, but there’s also a lot of bottom-up identity, things to be recognised, problems that have been under the surface that all of a sudden you feel free to talk about. That layer in the middle is having to deal with both sides of that, and I think typically they get quite quite a hard rap and not maybe as much support as they deserve.

The other thing is really to have a little bit more patience with complexity. There’s a lot of emphasis on looking for a killer fact, looking for a soundbite, looking for a solution before we necessarily understand the full scale of what we’re dealing with. It doesn’t stop you from moving quickly, but actually trying to understand and unpick what identity is, what vulnerability is, and so on, is not something you’re going to do in five minutes. So I think just having a little bit more patience with problems that we’re only really beginning to see and understand in their fullness now, I think would stand everyone in good stead.

Julia: I suspect this won’t be the last time that we’ll talk about this very topic, because as you say, having some patience around the complexity is important. It has been a really fascinating discussion. I’d just like to take a moment to thank you both, Gavin and Lee. Thank you.

Gavin: Thank you.

Lee: Thank you.

Kieron: This episode of the DiverCity Podcast was produced by me, Kieron Yates, on behalf of Julia Streets Productions. Thanks to Cynthia Akinsanya and Robert Pinto-Fernandes for their insights. You can find out more about the guests on this week’s show on our website, divercitypodcast.com. Whilst you are there, you can also sign up to our newsletter for all our latest updates.

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