With Macau-based MdME Lawyers having just launched a new digital transformation team to help Asia’s IRs capitalize on technological opportunities, Partner Rui Pinto Proença and Special Counsel and Technology Expert Lawyer Victoria White explain how digital is the way forward for gaming and tourism operators.
IAG: When we talk about digital transformation, what does that mean for gaming and tourism operators?
MdME: We see a digital-first approach for IR operators centered around four main areas: cashless operations, digital yuan, technology joint ventures and convergence with online formats, both in the gaming and non-gaming segments. Touching on these, cashless payments and digital wallets have now become the default method for consumer transactions and the preferred payment channel for businesses alike. Operationally, we see greater efficiencies, better real-time oversight of cashflows, and less risk of fraud and counterfeits.
Especially after the pandemic, cashless payments and other contactless solutions help counter public health concerns and employers’ responsibilities around risks of virus transmission through physical money exchanges. They also equip operators with a new array of resources to promote responsible gaming. Consumer expectation now demands availability of cashless payment solutions throughout the IR even in previously cash-intensive areas of the business.
So there is the opportunity to implement cashless payment infrastructure in all areas of IR operations – and also to integrate it with internal business systems for improved business analytics and insights.
On a similar track, the impending introduction of the Chinese digital yuan currency will trigger the need for payment facilities and systems capable of accepting digital yuan, to service Chinese consumers and RMB transactions in future. Customers will be arriving with digital yuan in their e-wallets and wanting to spend them.
Nearby Shenzhen has already participated in two rounds of pilot trials for the digital yuan, and it is intended that the digital yuan will facilitate cross-border RMB and overseas payments. IR operators that take the lead in revamping strategies and operations will be best placed to serve customers’ needs and take advantage of potential opportunities that the digital yuan may provide. Opportunities may also extend to vendors to develop API on China’s Blockchain-based service network for integration with digital yuan payment systems.
Technology joint ventures, and investment from leading technology companies in the travel and leisure, and consumer internet sectors, will play a crucial role in updating the IR product to attract digital-generation consumers. Here, we are talking about a significant stakeholder commitment from the tech companies, beyond simple joint marketing promotions or services provision. A good reference is the joint venture which Marriott International hotels established with Alibaba, which has a dedicated workforce and management.
It has allowed Marriott to roll out facial recognition check-in pilots, no-deposit reservations, faster check-out payments, and other service innovations, as well as its online storefront on Fliggy.
These tech companies have considerable non-gaming resources to leverage and are closer to the consumer in their home market, which is especially important at the moment while frequent travel is somewhat restricted.
Equally, IR operators hold attractive offline assets for these tech companies, like retail and concert venues for staging virtual live-streaming events. So there are positive synergies for a deeper relationship between these parties for future growth and development.
Another strategic move is diversification of the business model into a convergence with online formats. We have seen interest from IR operators in expanding their portfolio into online gaming and sports betting companies.
It is a reality that a mix of online and offline assets will be needed going forward to cater to increasingly digital preferences and hedge against unforeseeable events that impact in-person visitations. Diversification may also take the form of licensing royalties from brand and content licensing deals with e-game developers and manufacturers, as the popularity of offline to online continues.
IAG: Digital is often associated with online gaming, but digital also has a strong role to play in the future for land-based operators too. What sorts of opportunities exist for land-based operators in Macau and Asia as a whole?
MdME: For Macau and Asia, there is the opportunity to capture the new digital-savvy, young, affluent leisure traveler through provision of a tech-driven, frictionless IR product. We are talking about a large market segment who may never have been attracted by the conventional IR model and offering before.
With a view to long-term sustainability, this is the target market that investors and authorities would like to see grow among visitors and the customer base. Digital transformation, therefore, plays a key part in equipping the IRs with the right tools and resources to appeal to this customer market.
IAG: What challenges do these present from a legal perspective?
MdME: With a focus on digital, the legal considerations around IT, cyber security, financial services regulations, data privacy and data transfers play more of a central role. These are familiar to agents in the tech space, but generally IRs may have less exposure. In addition, there are the existing regulatory aspects applied in a new context, for which consultation and confirmation may be needed.
From a compliance perspective, certain elements of digital transformation, such as cashless payments and digital yuan transactions, may in fact help to increase efficiency of transaction analysis for reporting purposes.
On the gaming side, most technology advancements will need to be validated from a regulatory standpoint to assure they provide at least the same level of comfort as existing solutions, in areas such as responsible gaming, AML and CTF, player protection and audit.
IAG: How are operators preparing for this digital transformation? Are they supportive or resistant to such technologies?
MdME: We see that the market has identified this digital transformation opportunity, and it has now become a race for digital among the IR operators. The businesses which have anticipated the new model and are updating strategies and operations will be best positioned to serve customers’ preferences, realize efficiencies and capture new market share.
We know that first-to-market in China is everything, so we expect significant movement among operators for positioning. Equally, there is a finite number of potential tech partners and online companies to form partnerships. Once these are paired off, latecomers will be left with few desirable options.
So there is incentive to act in order to take the best position. What we are seeing ahead is the potential to significantly improve customer experience and gain an all-new market segment in the process. As in any race, there will be winners and losers.
IAG: There has been talk on digital currencies and the role they may play in the industry in the near future. What is your take on the implementation of digital currencies into land-based gaming, and the effects on the industry?
MdME: Leaving aside decentralized crypto-currencies, like Bitcoin, Ether and Binance Coin, we see digital sovereign currencies such as the Chinese digital yuan becoming a reality in the IR ecosystem in the near future.
During the past year, pilot trials of the digital yuan have been carried out in multiple Chinese cities, for both online and offline transactions. The digital yuan intends to facilitate overseas payments in RMB and expedite payment operation processes. At the same time, the inherent traceability of digital yuan transactions, both domestically and overseas, may impact on demand-side factors that will need to be considered in the overall financial outlook.
IAG: Another hot topic on the agenda is crossover technologies, such as in-room play. How likely are we to see this become mainstream across Asia in the near future?
MdME: Today’s entertainment world is dominated by online experiences and streaming content. To keep pace with customers’ fast-changing preferences, IRs will need to develop new and innovative products and rethink the way these are offered on their properties.
Traditionally, games are played within designated areas, which have barriers to entry and a robust operational and surveillance infrastructure. Limiting play to the gaming floor is still commonly perceived as the only way to, amongst others, prevent fraud, avoid money laundering and to preclude under-age play.
However, as technology develops – particularly cashless payments and biometric identification – this perception is changing. We will soon reach a point where regulators will become comfortable enough to permit play outside the gaming floor.
Allowing patrons to place different types of bets from their hotel rooms, a restaurant or even the pool lounge will be a game-changer. If we combine this with other non-gaming advancements such as in-room shopping and delivery of immersive entertainment, we could be looking at a completely different IR experience in the future.
IAG: With an eye on Macau in particular, how open-minded are regulators across Asia about the introduction of new digital technologies?
MdME: We are seeing developments in regulators’ outlook on new technologies, accelerated by the situation in the past year. For instance, the Nevada Gaming Control Board recently approved a cashless wagering module which may enable contactless, more efficient transactions.
At the same time, PAGCOR allowed land-based casinos in Manila’s Entertainment City to offer online gaming to domestic players, which was something unimaginable no more than one year ago.
By virtue of their role, and in some cases, scarcity of resources, Asian regulators typically take a more conservative approach to technology. Sometimes, it is a matter of educating and bringing awareness of the benefits that these new digital tools and systems can bring, to gain regulatory support. We are at a very interesting intersection where the same technology could, at the same time, be an enabler for business as well as a more effective way to achieve public policy goals. Think of cashless payment: it enhances customer experience, and it may also be used to promote responsible gaming by limiting spend.
As these technologies become more reliable and may be tested to regulators’ satisfaction, we believe barriers will start being removed. Our views are somewhat echoed by recent statements of the DICJ’s director, who declared that the Macau gaming regulator will make further use of technology in its own operations in order to increase its efficiency.
IAG: MdME has recently announced the launch of a digital transformation team, to be led by Victoria. What prompted this move and why now?
MdME: Our aim is to help our IR clients convert these digital opportunities into actionable solutions across their businesses. Implementing strategies and operations for digital inevitably raises legal considerations.
The team we have set up specializes in navigating the IT, fintech, privacy, regulatory, and gaming aspects of digital-first solutions relevant to this industry. The market has recognized a need for digital change to meet the new digital economy and consumer demands. We are supporting IR clients on the legal side to effect digital transformation to enable them to seize these opportunities.