Despite a dip in overall betting activity, high-income millennials dominated US gambling spend as 2023 came to an end. However, according to TransUnion’s (TU) latest US Gaming Report, rising debt and the return of student loan payments could indicate coming headwinds.
“We continue to see the relationship between consumer liquidity and the industry,” Declan Raines, head of TransUnion’s gaming business, told Bonus.
When consumers find extra cash, they are far more likely to wager it.
Raines said millennials have benefitted most in recent years from the strong US job market. In turn, that has translated to cross-channel US gambling growth.
Despite a 10% downturn in overall betting activity during the second half of 2023—particularly among Gen Z—for millennials, spending remained high, he added.
Consumers, again that millennial demographic, are continuing to allocate their disposable income towards betting activities, whether it’s sportsbooks, lottery, etc.
In the last issue of its US Gaming Report, TransUnion found US bettors are more vulnerable to fraud than their non-betting counterparts.
Millennials Optimistic Despite High Debt Load
The report combines an online survey of 3000 US adults with analyses of industry performance and consumer liquidity. It found US gaming participation in Q4 dropped to 24%, down 4% from Q3.
While millennials (1980-1994) bucked that trend, growing by 3%, participation dropped for other generations, with the most significant dip (7%) for Gen Z (1995-2005).
At the same time, 77% of millennials reported their 2023 household finances as “better than planned.” Meanwhile, only 51% of Gen Z, 41% of Gen X (1965-1979), and 15% of baby boomers (1944-1964) said the same.
However, millennials’ outsized impact on US gambling could eventually spell trouble for the industry.
As TU noted, US credit card debt surpassed one trillion dollars in Q3, and consumer delinquencies are rising. Additionally, federal student loan payments resumed in October after a pause during the pandemic.
High-Value Players Have High Loan Payments
Unfortunately for operators, millennials own nearly half of all US student debt. As the most crucial demographic for US betting, it will be critical for operators to understand player liquidity.
Additionally, millennial or not, TU found bettors over-represented among those with federal student loans.
Of bettors who deposit more than $500 a month (land-based or online), 71% have an active student loan. While the percentage was lower for players who deposit under $500 monthly, it was still double the non-betting population.
Further, TransUnion found bettors tended to have higher monthly payments. While only 15% of non-bettors reported loan payments of $800+ a month, 72% of online high-deposit bettors had comparable amounts.
So, while bettors are more likely to earn a high income, they’re also more likely to have student loans in repayment, with higher monthly fees. TU cautions millennials’ overrepresentation could cap industry growth in the short to medium-term.
Raines told Bonus:
If you’re a millennial with a high income, but you’ve got your student loan repayment beginning, that will be a headwind. If you’re a high-earning millennial who doesn’t have a student loan, you have reasons to be optimistic and to continue allocating discretionary income to activities like betting.
The industry needs to stay diligent in regards to how they’re assessing risk because people’s circumstances can change pretty quickly.
Big Spenders Embrace Cross-Channel
On a more optimistic note for operators, the report found only 17% of bettors and 2% of high-value bettors ($500+) are single-channel players.
The shift indicates efforts to cross-sell are working, said Raines.
We know there are a lot of companies in the sector pushing towards having that omnichannel experience, whether it’s having multiple online products or whether it’s having land-based and online products.
We see quite a bit of cross-pollination in this edition.
While most players engaged in betting across multiple channels, 45% placed a bet in every channel (land-based and online casinos, retail and online sportsbooks, land-based and iLottery). For high-value players, that number jumped to 75%.
While the report found Gen Z still lagging behind their millennial counterparts in betting activity, that gap also presents an opportunity.
Less than ten years ago, how to bring millennials into the fold was a growing concern in the gambling industry.
But, as the TransUnion reports showed, millennials now dominate the gambling space. And operators have a chance to capture Gen Z similarly, said Raines.
Gen Zs, their incomes will probably lag a bit behind millennials. But as their incomes increase, they’re more likely to engage with more channels. So, if you’re an operator, you can look at a more immediate strategy of how do I acquire more individuals within that particular demographic.
At the same time, as they invest in the omnichannel experience, they will have more captures. As Gen Z’s circumstances improve, as their incomes improve, they’ll be more likely to engage with the omnichannel experience like you see with millennials.
Online Casino & Sports Betting Have Similar Risk
Something that will stick out for online casino proponents: According to the report, online casino and sportsbook players share similar risk profiles.
When looking at access, said Raines, there’s a big difference in the number of states permitting online casinos versus online sports betting.
Given the nature and newness of the channel, TU noted elevated concerns about the risk profiles of online casino bettors contributing to that imbalance. However, TransUnion found no significant deterioration in the risk profiles of online casino bettors.
Raines told Bonus the same:
If someone’s going to be categorized as potentially high risk or someone that maybe has unsustainable levels of play within online sports betting. There’s no huge difference between what they look like versus what an online casino player looks like.
Initial indicators showed casino users could even present slightly less risk than sports bettors. When isolating high-value bettors within the online casino and online sportsbook channels, TU found more high-risk bettors using online sportsbooks.
The study cautions that the industry is still in its infancy, so risk profiles could change.
It’s also worth noting that TU’s study compares player populations as a whole without correcting for demographics. Part of the risk of sports betting is that it appeals predominantly to young men, who are at higher risk to begin with. Other studies that consider the problem at the individual level have often found that slots are the highest-risk gambling product after taking demographics out of the equation.
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