GAMBLING ON THE FUTURE OF THE FINANCIAL SERVICES INDUSTRY

The stakes are high for financial services. The world gambling industry turnover is in excess of US$400 billion and rising. The growth sector is online gambling, 30% of which is located in the UK. The beneficial tax treatment for gambling encourages betting products that emulate the results of financial services products. Banks, exchanges and insurance sector players need to watch this space carefully - the leading online gambling exchange, Betfair, in just four years has a rumoured IPO value of around 50% of the London Stock Exchange's current market capitalisation of just over £1 billion.

The stakes are also high for regulators and the Government. While the gambling market can emulate much of the financial services sector, substantial aspects of gambling are currently very lightly regulated in comparison with financial services.

Michael Mainelli of Z/Yen Limited, together with Sam Dibb, today presented a leading-edge report on the online gambling market and the impact this market is having and will have on the financial services industry. The presentation for the Centre for the Study of Financial Innovation (CSFI) enraptured a sizeable audience of City, Professional, Regulatory and Gambling Sector leading lights.

A copy of the paper is attached. This is a serious paper on a serious topic, but we draw your attention to two especially interesting and newsworthy subsections:

• The box on page 11 shows you how you can arbitrage the online gambling markets and therefore make risk-free returns. As the markets mature, of course, such opportunities will become harder and harder to exploit, but they do still exist;
• The box on page 20 highlights the potential for money laundering in the lightly regulated world of traditional UK bookmakers, a group that is excluded from the UK Money Laundering Regulations 2003.

This fascinating report also takes several punts on the likely future for the gambling industry and the potential impact on the financial services sector. If the financial services industry continues to ignore the advancing online gambling market, it will be taking a punt on losing many of its own markets permanently.

CSFI Publication

CSFI Press Release

For further information, please contact Michael Mainelli,
Tel: (020) 7562-9562
E-mail: michael_mainelli@zyen.com.

Z/Yen specialises in risk/reward management, an innovative approach to improving organisational performance. Z/Yen's clients include blue chip companies in banking, technology and professional services as well as charities, government and care organisations (see www.zyen.com).

Z/Yen is delighted that the CSFI asked Z/Yen to produce this report and is equally delighted with the initial reception today. Together with the paper, we also attach a copy of the original CSFI press release, which was issued prior to the formal launch.