Q&A: Winners Group COO Phillip Wilson on potential of online lottery

In an era of rising taxes and increased regulation, the ability to reach out to a previously untapped market is something online operators are continually striving for.

And according to Winners Group chief operating officer Phillip Wilson, the offer of secondary online lotteries from across the globe can provide the perfect platform to attract a new demographic of player.

Speaking to EGR Intel, Wilson says the $300bn market is one often overlooked by online operators but, through the use of insurance schemes, regular large jackpots can now be offered to ensure an attractive, mass market product.

EGR Intel: Why are secondary lotteries getting so much attention, and how do they differ from traditional lotteries?

Phillip Wilson (PW): Lottery is a giant of a vertical that has been overlooked by most of the egaming industry. Secondary lottery brands sell synthetic tickets by insuring the jackpot, or use an agent to buy a ticket (lottery messenger). This offers players variety, more opportunities to play and access to much more thrilling larger jackpots.

Secondary lottery brands offer an experience that is familiar to millions, and by emulating the experience of purchasing a real ticket. When the insurance model is used, we are not reliant on selling a billion dollars of tickets. Thanks to insurance, jackpots can be matched and even increased, but when the player wins the jackpot, the insurance company makes the payment.

EGR Intel: How big is the secondary lottery market, and what is the growth opportunity in 2017?

PW: The market size is an oddity, worth more than $300bn per year, and for most countries in Europe, more than 80% of the adult population play regularly. The secondary lottery market is a fragment of that. The growth opportunity is two-fold, by offering players more choice, and greater frequency, spend per player can increase. Specifically in egaming, it allows operators to access a previously unattainable customer.

Some brands are reporting more than three million customers from a standing start only a few years ago. The main challenges are awareness and trust. In 2017 we will see the first large operators launching their own secondary lottery verticals thanks to institutional insurers now offering policies, with a solid pay out record. The number one question we get when talking to large operators about lottery is risk management.

Across egaming and ecommerce in general, disruptive mobile products are driving growth, and we are seeing companies with billion dollar revenues that you simply would not have considered three years ago – think Uber, for example.  Lottery is a game that has widespread appeal, and most importantly does not have the stigma of gambling associated with it – it is the first mass market egaming vertical.

EGR Intel: How are secondary lotteries insured? Is it safe, and how difficult is it to obtain?

PW: If you have the correct licence, there are many companies now operating shared pool policies with little or no entry barriers. When talking to our own clients, who can choose between our policies or using their own, we help them to look at the terms of pay out, and complexities such as multiple draws on multiple days.

Lottery jackpots are huge, and so the risk of not being paid is also huge. Product and platform providers should allow you to choose whether you want to take on your own risk management, and choose between shared or individual policies.

Insuring a jackpot is the same as insuring the contents of your house – in exchange for a premium, an insurance company will agree to cover lottery jackpots, up to an agreed limit. Institutions such as Lloyds are now actively seeking to insure these types of policies.

An alternative to traditional insurance, the ILS (insurance linked security) has had a lot of press, but should be treated with caution when you don’t know who the investors involved are. With more than 20 multi-million pound jackpots to cover on a Saturday, getting the right insurance cover in place has been challenging, and risk management becomes the most important aspect of your business.

EGR Intel: What can we expect from the wider online lottery sector in 2017?

PW: One thing is for sure, innovation from state operators is not at the top of the list. The obvious answer would be mobile and a shift from retail in general. However, with court cases taking place across the world testing the viability of secondary lottery (and unsuccessfully so far), we are sure that state operators are paying more attention as they start to lose loyalty due to customers waking up to the fact they are able to make choices about which lotteries to take part in.

The rise in secondary lottery brands is starting to prove just how hungry players are for choice and a greater frequency of play. Inevitably, state and secondary operators will find a peaceful way to co-exist as they realise it will reignite a passion for this historic game. It is an exciting time for the lottery industry as a whole, and we look forward to an unprecedented year of growth in 2017.

For affiliates in this space, this will be an exciting year as the volume of customers increase, and importantly spend per customer increases. We will see more sophisticated products and platforms appear, and more competition for us in the B2B marketplace. Competition is great news as it drives awareness, quality, profitability, and will greatly improve the level of customer and user experience.